00:01
So the answer here is hopefully kind of obvious, but let's go through them anyway, right? if you just want the answer, the answer is c, but, you know, we can go through them, right? so the first one has to do with marginal utility.
00:18
But marginal utility is a story about personal preferences.
00:23
It has nothing to do with costs whatsoever, right? utility doesn't tell you anything about costs, right? if you like cheesecake, that doesn't tell you anything about how expensive it is to make cheesecake, right? that it's just completely unrelated, right? the atc avc gap.
00:46
Well, the atc ab gap is the equals to the fixed cost over the quantity, right? the definition between total cost and variable costs is fixed costs, right? but fixed costs has nothing to do with marginal costs, right? marginal costs are how much you pay if you produce one more unit, but the fixed cost has nothing to do with the quantity of units, right? marginal costs have only things to do with variable costs, but this gap is exclusively a story about fixed costs.
01:29
So this is impossible, right? the decline in the gap is simply because fixed costs.
01:33
Cost over q is getting smaller, right? when you spread your fixed costs out over more units, they get smaller on average.
01:40
D, constant marginal revenue, right? and the answer here is c.
01:47
Constant marginal revenue is just telling you is that the price is unchanging, right? if you have the only way that the constant marginal revenue is constantly if you're operating in a competitive market.
02:08
So it has nothing to do with marginal returns, right? so the answer here is c, right? and the answer here is increasing and then decreasing returns.
02:26
So to see this, let's try to plot increasing and decreasing marginal returns.
02:31
So if we think about q, what's happening to marginal returns.
02:43
So first of all, marginal, let's see, value added or something like this, right? it's telling you look, at the very beginning, you're gonna be very inefficient...