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Lecture 76

ECON 1010 Lecture 76: Lecture 76

3 Pages

Course Code
ECON 1010
Laura K.Brown

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o|82 1. Graphs of average and marginal cost are useful when analyzing the behaviour of firms 2. X axis measures the quantity the firm produces 3. Y axis measures marginal and average costs 4. The graph shows four curves: 1. Average total cost (ATC) 1. Average fixed cost (AFC) 1. Average variable cost (AVC) 1. Marginal cost (MC) 5. Rising Marginal Cost: 1. Marginal cost rises with the quantity of output produced 1. This reflects the property of diminishing marginal product 6. U-Shaped Average Total Cost: 1. Average total cost is the sum of average fixed cost and average variable cost 1. Average fixed cost always declines as output rises because the fixed cost is spread over a larger number of units 1. Average variable cost typically rises as output increases because of diminishing marginal product 1. Efficient scale: the quantity of output that minimizes average total cost 1. At the efficient scale
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