Question

In: Economics

On a graph, draw all the following a. The average fixed cost curve (AFC) b. The...

On a graph, draw all the following

a. The average fixed cost curve (AFC)

b. The average total cost curve (ATC)

c. The average Variable cost curve (AVC)

d. The marginal cost curve (MC)

EXPLAIN THE REASONING BEHIND THE SHAPE AND LOCATION OF EACH CURVE

Solutions

Expert Solution

The Average cost and average variable cost curves are U shaped because of application of law of returns to factor which ststes that as more and more variable inputs are employed along with the fixed factors, the total product first increases with an increasing rate, then at decreasing rate. The marginal product finally becomes negative.
The increasing rate stage pulls the average cost/average variable cost down and decreasing rate or MP becoming negative stage will take the AVC and ATC curve up.
The fixed costs are always constant. Average fixed cost is per unit fixed cost. So with an increase in output, the average fixed cost tends to fall continuously. MC cuts AVC and ATc at its minimum and rises faster than AC.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

If the Total Variable Cost (TVC) curve is rising then: A.  The Average Fixed Cost (AFC) curve...
If the Total Variable Cost (TVC) curve is rising then: A.  The Average Fixed Cost (AFC) curve must be falling. B.  The Average Variable Cost (AVC) curve must be rising. C.  The Average Total Cost (ATC) curve must be rising. D.  The Average Variable Cost (AVC) curve must be falling. E.  The Marginal Cost (MC) curve must be rising.
Consider a firm with a constant marginal cost curve. Sketch the average cost curves( ATC, AFC,...
Consider a firm with a constant marginal cost curve. Sketch the average cost curves( ATC, AFC, AVC) and associated marginal cost curve. And explain why the cost curves would look as sketched.
Consider a firm with a constant marginal cost curve. Sketch the average cost curves( ATC, AFC,...
Consider a firm with a constant marginal cost curve. Sketch the average cost curves( ATC, AFC, AVC) and associated marginal cost curve. And explain why the cost curves would look as sketched.
-Define Profit, using equations(Using the average cost curve) -Draw a graph where the oil price =...
-Define Profit, using equations(Using the average cost curve) -Draw a graph where the oil price = $52/ barrel, Quantity supplied max = 32 barrels and Average Cost(@Q=32) = $54 -What is the profit this firm earns?
Which of the following represents a firm’s demand curve for a resource? ​Average fixed cost curve...
Which of the following represents a firm’s demand curve for a resource? ​Average fixed cost curve ​Average total cost curve ​Average variable cost curve ​Marginal revenue product curve ​Marginal resource cost curve
Draw a correctly labeled graph showing a long-run average cost curve.  Label the sections showing economies of...
Draw a correctly labeled graph showing a long-run average cost curve.  Label the sections showing economies of scale, diseconomies of scale and constant returns to scale.   Explain economies of scale, constant returns to scale, and diseconomies of scale. Multiple Choice In the long run: All inputs can be varied. No inputs can be varied. Only variable inputs can be varied. Only fixed inputs can be varied. A limited number of inputs can be varied. Sunk costs: Are costs that can be recovered...
a. Use the information to sketch the income consumption curve on a graph. b. Draw the...
a. Use the information to sketch the income consumption curve on a graph. b. Draw the Engel curves for hot dogs and hamburgers. Income HotDogs Hamburgers $10 3 7 15 6 9 20 10 10 c. What is the income elasticity of hot dogs for this consumer as income increases from $10 to $15? (calculate using percentage changes of income and quantity demanded).
A. draw a graph showing the marginal cost, average total cost, demand, marginal revenue, and average...
A. draw a graph showing the marginal cost, average total cost, demand, marginal revenue, and average revenue for a perfectly competitive firm. Indicate the level of profit where profit is maximized, shade in the area of maximum profit, give the amount of maximum profit, and explain how this number is calculated. B.Graph the short-run supply curve for a perfectly competitive firm and explain where this short-run supply curve lies. Indicate the following curves on your graph: marginal cost curve, marginal...
Draw a graph showing the Total Fixed Cost, Total Variable Cost, and Total Cost curves.
                                             INSTRUCTIONS FOR TABLE 1 and Two Graphs-21 points1) Calculate the Total Cost (TC) for each level of output. (3 points)2) Calculate the Average Fixed Cost (AFC) for each level of output. (3 points)3) Calculate the Average Variable Cost (AVC) for each level of output. (3 points)4) Calculate the Average Total Cost (ATC) for each level of output. (3 points)5) Calculate the Marginal Cost (MC) for each level of output. (3 points)Using the data from Table 1 draw two graphs:Draw...
Illustrate the per unit cost graph. You must include average total cost, average fixed cost, average...
Illustrate the per unit cost graph. You must include average total cost, average fixed cost, average variable cost and marginal cost.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT