A linear total cost curve which passes through the origin implies that
A)average cost is constant and marginal cost is variable.
B)average cost is variable and marginal cost is constant.
C)average and marginal costs are constant and equal.
D)need more information to answer question.

Question

Quizplus · Accepted Answer

A linear total cost curve passing through the origin suggests that the fixed cost is zero, and the only cost incurred is the variable cost. Since the slope of a total cost curve represents the marginal cost, a constant slope indicates a constant marginal cost. Average cost is determined by dividing total cost by the quantity produced. Therefore, if total cost is a straight line through the origin, then average cost is also a straight line with the same slope. As a result, both average cost and marginal cost would be equal and constant in this situation. Therefore, the correct option is (C).

A Linear Total Cost Curve Which Passes Through the Origin