MC, midpoint formula, cross price elasticity

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Colorado State University
Agriculture + Resrce Econ
AREC 202
Christopher Goemans

9 November Pre Lecture warm-up If TC = 1000 for 3 units What is ATC for three units? If AVC = 20 for 4 units What is TVC for four units? If TC for 0 units = 60 What are fixed costs? $133.3 1000 / 3 $80 4 x 20 $60 What if TC = 600 + 20Q what are fixed costs? 600 When Q = 0, total cost = 600 MC often goes down first, and then begins to rise Goes down when people start to specialize, productivity goes up It rises as you run into scarcities of space, other resources The difference between AVC and ATC converges as we produce more The difference between AVC and ATC is AFC At first (looking at ATC), it becomes cheaper and cheaper to produce Then after a point it gets more and more expensive to produce The cheaper section – Increasing returns to scale The more expensive section – decreasing returns to scale In the long run, all inputs become variable What would happen if you invested in cost saving technology which has high initial costs, but saves you money? Your average total cost goes from having a low fixed cost and higher
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