CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

At higher levels of output, total cost tends to ______
A. increase at a decreasing rate.
B. increase at an increasing rate.
C. decrease at an increasing rate.
Explanation: At higher levels of output, total cost increases at an increasing rate because of the law of diminishing marginal product, which implies increasing marginal cost.

User Contributed Comments 4

User Comment
danlan Is law of diminishing marginal related to cost?
aakash1108 Yes it does - as output increases, the marginal cost for every additonal unit exceeds the previous unit - this implies that the returns (total revenue - cost) on every additional unit (may be positive but) is lesser than the previous unit. - this states the law of Diminishing returns.
viannie TC = fixed cost + variable cost
showmethemoney i must say this is a good one
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