563
1 point: FC = $40
1 point: We can identify the fixed cost as $40 because when the firm is not producing, it still incurs a cost of $40. This could only be the result of a fixed cost because variable cost is zero when output is zero.
1 point: Graph with correct labels (“Cost of unit” on vertical axis; “Quantity” on horizontal axis)
1 point Upward-
1 point: U-
1 point: MC curve crossing at minimum of ATC curve (Note: We have simplified this graph by drawing smooth lines between discrete points. If we had drawn the MC curve as a step function instead, the MC curve would have crossed the ATC curve exactly at its minimum point.)