Question

In: Economics

1. GLS Chapter 7, Question 13: True or false: Average variable cost reaches its minimum point...

1. GLS Chapter 7, Question 13: True or false: Average variable cost reaches its minimum point at a lower level of output than average total costs. Explain your answer, using a graph of average and marginal costs to illustrate.

Solutions

Expert Solution

Answer.) 13. True. Marginal cost will intersect Average variable cost and Average total cost both of these curves at their minimum points.

The ATC curve, as illustrated in above figure, is U-shaped because the AVC cost curve is U-shaped. This is accounted for by the Law of Variable Propor­tions. It first declines, reaches a minimum (at Q3 units of output) and subsequently rises. The min­imum point on ATC is reached at a larger output than at which AVC attains its minimum.

We know that the vertical distance be­tween average total cost and average variable cost measures average fixed cost and average fixed cost continuously falls over the whole range of output. Thus, ATC declines at first because both AFC and AVC are falling. Even when AVC begins to rise after Q2, the decrease in AFC continues to drive down ATC as output in­creases. However, an output of Q3 is finally reached, at which the increase in AVC overcomes the decrease in AFC, and ATC starts rising.


Related Solutions

True and False 1) Average total cost and average variable cost are minimized at the same...
True and False 1) Average total cost and average variable cost are minimized at the same level of output. 2) When marginal cost is between average variable cost and average total cost, marginal cost is increasing. 3) Average total cost of producing 100 units of output is $5. If the marginal cost of producing the 101st unit is $4, then average total cost of 101 units is less than $5. 4) Average variable costs fall continuously as quantity of output...
Question 13 (1 point) Every invertible matrix is diagonalizable. Question 13 options: True False Question 14...
Question 13 (1 point) Every invertible matrix is diagonalizable. Question 13 options: True False Question 14 (1 point) Every diagonalizable matrix is invertible. Question 14 options: True False
1. The typical total product curve Question 13 options: a) reaches its highest point at the...
1. The typical total product curve Question 13 options: a) reaches its highest point at the output level where marginal product is zero. b) has an inflection point where the technology switches from increasing to diminishing marginal returns. c) is falling when there are negative marginal returns. d) starts at the origin e) all of the above Anytime a firm faces a situation where MR < MC, the firm should Question 15 options: a) increase output. b) lower price. c)...
7. Chapter 13, Question 2: Use the attached data file “Chapter 13 Data Set 1” to...
7. Chapter 13, Question 2: Use the attached data file “Chapter 13 Data Set 1” to answer this question in the book. Do you agree with the author’s conclusion about whether practice time makes a difference? <15 Hours Practice 15-25 Hours Practice More than 25 Hours Practice 58.7 64.4 68 55.3 55.8 65.9 61.8 58.7 54.7 49.5 54.7 53.6 64.5 52.7 58.7 61 67.8 58.7 65.7 61.6 65.7 51.4 58.7 66.5 53.6 54.6 56.7 59 51.5 55.4 54.7 51.5 61.4...
Question 1 (1 point) Broaden and Build Theory is related to negative emotions True False Question...
Question 1 (1 point) Broaden and Build Theory is related to negative emotions True False Question 2 (1 point) Secondary emotions are not present since birth True False Question 3 (1 point) Dispositional Optimism is a kind of Personality Trait. True False Question 4 (1 point) Martin Seligman termed Explanatory style of thinking as the main reason behind optimistic attitude True False Question 5 (1 point) "Pride" is an example of a secondary emotion True False
QUESTION 33 Average fixed cost always decreases. True False ------------------------ QUESTION 31 If a price ceiling...
QUESTION 33 Average fixed cost always decreases. True False ------------------------ QUESTION 31 If a price ceiling is imposed below the equilibrium price then _____. A. the market can still reach equilibrium B. excess supply is created C. demand will decrease D. supply will increase E. excess demand is created --------------- QUESTION 29 A price floor on corn would have the effect of which of the following? A. Creating an excess supply regardless of the price. B. Creating an excess supply...
1.(TRUE or FALSE) In Variable Costing FOH is treated as a period cost and NOT deferred...
1.(TRUE or FALSE) In Variable Costing FOH is treated as a period cost and NOT deferred to a follow on period. 2.(TRUE or FALSE) In Absorption Costing if production is greater than sales inventory goes up and those costs are deferred to another reporting period.
Question 1 The name of S3 access point cannot start with a dash. True False Question...
Question 1 The name of S3 access point cannot start with a dash. True False Question 2 Which of the following is an incorrect statement about IAM (Identity and Access Management)? IAM’s goal is to secure the system. IAM grants or denies access to the system. IAM only grants access to the system and does not deny access to the system. IAM is linked to the business policies and procedures. Question 3 AWS services cannot be accessed/managed by using Software...
Question 1 Which of the following is true at breakeven point? a) Sales revenue = variable...
Question 1 Which of the following is true at breakeven point? a) Sales revenue = variable cost b) Profit = fixed cost + variable cost c) Sales revenue = total cost – variable cost d) Contribution = fixed cost Question 2 An increase in fixed costs will result in which of the following: a) A decrease in the contribution to sales ratio b) A decrease in the contribution per unit c) An increase in the breakeven point sales d) An...
True or false?(1 point each) When marginal product is less than average product, average product is...
True or false?(1 point each) When marginal product is less than average product, average product is decreasing. In the long run, fixed costs are small. Marginal cost is the increase in total cost that results from a one-unit increase in a variable input. The vertical distance between the average variable cost curve and the average total cost curve equals average fixed cost. Average fixed costs are constant. Perfectly competitive firms are price takers. In the long run, perfectly competitive firms...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT