Question
In: Economics
explain what happens to AFC, AVC, ATC, and MC curves in the following two situations I....
explain what happens to AFC, AVC, ATC, and MC curves in the following two situations
I. fixed cost increases
ii. variable cost increases.
Solutions
Expert Solution
(i) when fixed cost increases, it increases the average fixed cost also. Hence, the total average cost also increases as shown in the diagram with upward shift of these curves. However, there is no change in terms of average variable cost or marginal cost since the increase in fixed cost is not associated with output level.
(ii) Whenn variable cost increases, average fixed cost curve does not change, where all other curves change. For example, increase in variable cost shifts the AVC curve upward and hence the AC curve upward as shown in the diagram below. Similarly, the MC curve also sifts up due to this. All these costs (VC, AVC, AC, MC) are associated with the level of output unlike fixed cost and average fixed cost.
Rahul Sunny answered 2 years agoRelated Solutions
Explain short-run cost behavior. AVC, AFC, ATC, MC.
Explain short-run cost behavior. AVC, AFC, ATC, MC.
Draw the MR, MC, AVC, ATC, Demand, supply, MC and MR for the following situations. For...
Draw the MR, MC, AVC, ATC, Demand, supply, MC and MR for the
following situations. For each of these situations show the total
revenue, total cost area, and shade the profit or loss area, and if
the situation is a shut down state why it should shutdown.
a.A monopolist showing a profit
b.A monopolist showing a loss but not a shut-down
c.A monopolist at a break-even point
d.Difference between a monopolist and a perfectly competitive
firm for a profit situation...
a. Fill the following table: Number of Earning TVC MC AVC TFC TC AFC ATC 0...
a. Fill the following table:
Number of Earning
TVC
MC
AVC
TFC
TC
AFC
ATC
0
100
1
50
2
95
3
46.67
4
300
5
270
b. Explain how price discrimination converts consumer surplus
into economic profit.
1- Draw the short-run ATC, AVC and MC curves for a business.
1- Draw the short-run ATC, AVC and MC curves for a business.
Show the supply curve with the prices at which a firm would
breakeven and shutdown. Label everything.2- Show the price and quantity for a perfectly competitive firm
that is making a loss in the short run. Also make sure to graph the
marginal revenue, marginal, average total and average variable cost
curves.
Assume the cost data is for a perfectly competitive firm: Q AFC AVC ATC MC 1...
Assume the cost data is for a perfectly competitive
firm:
Q
AFC
AVC
ATC
MC
1
60
45
105
45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Complete the following table:
P = 56
P = 40
P = 32
Will this...
Assume the cost data is for a perfectly competitive firm: Q AFC AVC ATC MC 1...
Assume the cost data is for a perfectly competitive
firm:
Q
AFC
AVC
ATC
MC
1
60
45
105
45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Complete the following table:
P = 56
P = 40
P = 32
Will this...
Fill the following table: (14 marks) Number of Earning TVC MC AVC TFC TC AFC ATC...
Fill the following table:
Number of Earning
TVC
MC
AVC
TFC
TC
AFC
ATC
0
100
1
50
2
95
3
46.67
4
300
5
270
b. Explain how price discrimination converts consumer surplus
into economic profit.
Explain why MC intersects ATC at the minimum point. Explain why MC intersects AVC at the...
Explain why MC intersects ATC at the minimum point. Explain why
MC intersects AVC at the minimum point.
Output TC MC ATC AFC TVC AVC TFC 0 1 2 3 4 5 6 7...
Output
TC
MC
ATC
AFC
TVC
AVC
TFC
0
1
2
3
4
5
6
7
8
AFC for 8 units of output is $4.5
AVC for 4 units of output is $15
TC is increased by $14 when the 5th unit of output
is added
The ATC of 6 units of output is the same as the ATC of 5 units
of output
TC for 7 units of output is $168
TVC is increased by $64 when the 8th...
Complete the columns for TR, MR, TFC, TVC, TC, ATC, AVC, and MC, as well as those for (TC), TVC, & TFC. Draw the curves for Demand (Price Vs. Quantity), MR (Marginal Revenue), ATC, AVC, and MC
QPTrMrTFCTVCTCMCATCAVCT(π)0$19.00$4.001$18.0042$17.0023$16.0014$15.0025$14.0036$13.0047$12.0058$11.0069$10.007 Complete the columns for TR,
MR, TFC, TVC, TC, ATC, AVC, and MC, as well as
those for (TC), TVC,
& TFC. Draw the curves for Demand
(Price Vs. Quantity), MR (Marginal Revenue), ATC, AVC, and MC, all in one diagram. Also draw the Total
Revenue (TR), Total Cost (TC), TVC, andTFC in a second diagram right below the first
one.Determine, in order to maximize profit. How many units this
firm should produce and explain.Demonstrate the geometric areas (rectangles) of Total...
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