Multiple Choice
Which type of graph would best represent the market for a perfectly competitive industry?
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0. Basic Principles of Economics
Graphing Review
Multiple Choice
Which of the following graphs in Figure 1 illustrates the behavior of a total fixed cost?
A
An upward-sloping straight line starting from the origin
B
A U-shaped curve
C
A downward-sloping curve
D
A horizontal line parallel to the quantity axis
Verified step by step guidance1
Understand the definition of total fixed cost (TFC): it is the cost that does not change with the level of output produced. This means TFC remains constant regardless of quantity.
Recall that a graph of total fixed cost against quantity will show how TFC changes as quantity changes. Since TFC is constant, the graph should reflect no change in cost as quantity increases.
Analyze each option: an upward-sloping line starting from the origin implies cost increases with quantity, which is not true for fixed costs; a U-shaped curve typically represents total cost or average cost behavior, not fixed cost; a downward-sloping curve suggests cost decreases with quantity, which is also incorrect for fixed costs.
Recognize that a horizontal line parallel to the quantity axis means the cost remains the same at all levels of output, perfectly illustrating the behavior of total fixed cost.
Conclude that the correct graph for total fixed cost is a horizontal line parallel to the quantity axis, reflecting its constant nature regardless of output.
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