CAS EC 201 Chapter Notes - Chapter 22: Average Variable Cost, Marginal Cost

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cyangerbil317

8 Nov 2016

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(cid:4666)(cid:1877)(cid:4667) total costs (cid:4666)(cid:1877)(cid:4667)=(cid:4666)(cid:4667) average cost function: the total cost per unit of output. (cid:4666)(cid:1877)(cid:4667) (cid:4666)(cid:1877)(cid:4667)=(cid:4666)(cid:4667) average variable cost function: the variable costs per unit of output. The fixed costs (cid:4666)(cid:1877)(cid:4667)= average fixed cost function: the fixed costs per unit output. The marginal cost indicates the change in our costs if we consider producing one more discrete unit of output. The average variable cost curve may initially slope down but need not. However, it will eventually rise as long as there are fixed factors that constrain production. The average cost curve will initially fall due to declining fixed costs but then rise due to the increasing average variables cost. The marginal cost and average variable cost are the same at the first unit of output. (cid:4666)(cid:883)(cid:4667)=(cid:4666)(cid:883)(cid:4667)+ (cid:4666)(cid:882)(cid:4667) (cid:883) The marginal cost curve passes through the minimum point of both the average variable cost and the average cost curves.

Related Questions

1. If marginal cost is less than average total cost, then:

A. average total cost is increasing with output.
B. average total cost is decreasing with output.
C. average variable cost is increasing with output.
D. average variable cost is decreasing with output.

2. The law of diminishing marginal productivity:

A. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will fall.

B. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will rise.

C. explains why marginal costs of production fall as additional units of output are produced.

D. explains why average productivity always rises.

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A student has just written on an exam that, in the long run, fixed cost will make the average total cost curve slope downward. Why will the professor mark it incorrect?

a) In the long run, there are no fixed costs, meaning the average total cost curve shifts down.

b) In the long run, fixed cost decreases as costs are spread out over a greater quantity of output. Declining fixed cost accounts for the downward-sloping average total cost curve.

c) In the long run, fixed costs increases as firms build new plants and purchase new capital. This means that the average total cost curve will eventually slope upward.

d) In the long run, firms have no fixed costâall costs are variable. The shape of the long-run average total cost curve is determined by economies of scale.