Question

Consider the following scenario to understand the relationship between marginal and average values. Suppose Edison is a professional basketball player, and his game log for free throws can be summarized in the following table. Fill in the columns with Edison's free-throw percentage for each game and his overall free-throw average after each game. Game Game Result Season Total Game Free-Throw Percentage Average Free-Throw Percentage 1 8/10 8/10 80 80 2 4/10 12/20 3 2/8 14/28 4 2/4 16/32 5 6/8 22/40 On the following graph, use the orange points (square symbol) to plot Edison's free-throw percentage for each game individually, and use the green points (triangle symbol) to plot his overall average free-throw percentage after each game. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Game Free-Throw Percentage Average Free-Throw Percentage 0 1 2 3 4 5 100 90 80 70 60 50 40 30 20 10 0 FREE-THROW PERCENTAGE GAME You can think of the result in any one game as being Edison's marginal free-throw percentage. Based on your previous answer, you can deduce that when Edison's marginal free-throw percentage is above the average, the average must be . You can now apply this analysis to production costs. For a U-shaped average total cost curve, when the marginal cost curve is below the average total cost curve, the average total cost must be . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be . Therefore, the marginal cost curve intersects the average total cost curve .

Answer 1

Game	Game Result	Total	Game free throw percentage	Average free throw percentage
1	8/10	8/10	80%	80%
2	4/10	12/20	40%	60%
3	2/8	14/28	25%	50%
4	2/4	16/32	50%	50%
5	6/8	22/40	75%	55%

Game free throw percentage is calculated for a particular game. For Game 2 , game free throw percentage = 4/10 = 40%. Similarly, for each game can be done.

Average free throw percentage is calculated from total game result . For Game 2 , Average free throw percentage = 12/20 = 60%.

Now, by plotting game free throw percentage and average free throw percentage , we get the following graph :

Now, game free throw percentage for a particular game can be think of as marginal free throw percentage. Becuase it is for a particular game.

We can from the above graph, that when Edison's marginal free- throw percentage is above the average then, the average must be rising.

Similar, result apply to production cost curves, when marginal cost curve is below the average ,then average must be declining and when marginal cost curve is above the average then average must be rising. And therefore, the marginal cost curve intersects the average total cost at its minimum.