MGEA02H3 Study Guide - Final Guide: Profit Maximization, Passive Smoking, Making Money
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MGEA02H3 Full Course Notes
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For the exams, ignore the origins of tc/ac/mc etc. , they will just assume we know them and work with it. Afc is a constant divided by quantity, is always going down but starts off extremely high (asymptotic). Avc begins to rise at a certain point because of diminishing marginal productivity. If ac is the sum of afc + avc, it starts off high because afc is very high, then it lowers, but comes back up because of the rising vc. Avc + ac start becoming closer and closer together as afc asymptotes towards 0. Mc goes through the minimum point on the avc and ac curve this always must be true. Vc = 100 + 5q + q2, q> 2. Minimum of the curve is always where the first derivative is equal to 0. Ac = 400/q + 5 + q dac/dq = -400/q2 + 1 = 0. 1 = 400/q2 q2 = 400 q = 20.