Consider the following properties of average variable cost 𝐴𝑉𝐶(𝑦) and average cost 𝐴𝐶(𝑦). Is each property consistent only with always increasing marginal cost, or only with U-shaped marginal cost, or with both?
Added by Tony P.
Step 1
- AVC is the total variable cost divided by the quantity of output produced (y). - AC is the total cost (fixed + variable) divided by the quantity of output produced (y). Show more…
Show all steps
Your feedback will help us improve your experience
Andrew Davis and 77 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Suppose a firm has no fixed costs, so all its costs are variable, even in the short run. a. If the firm's marginal costs are continually increasing (that is, marginal cost is increasing from the first unit of output produced), will the firm's average total cost curve have a U shape? Briefly explain. b. If the firm's marginal costs are $\$ 5$ at every level of output, what shape will the firm's average total cost have?
Technology, Production, and Costs
The Relationship between Short-Run Production and Short-Run Cost
Average cost curves (except for average fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Do you think that average and marginal cost curves have the same general shape and why?
Jennifer S.
'Which of the following statements is TRUE? The average variable cost curve must always be U-shaped. At a production level where & firm has economies of scale, the below the average cost. rising marginal cost is If increasing returns to scale are present; the long-run average cost increases as more output is produced. If the average total cost is increasing as output increases, then the average fixed cost is also increasing: None of the above_'
Shalini T.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD