1)As a firm increases production, average total cost _____. awill stay the samebwill decreasecwill increasedmay either increase or decrease 2) As a firm increases production, total cost _____. awill stay the samebwill decreasecwill increasedmay either increase or decrease

Since you have asked multiple questions, we will solve the first question for you. If you want any specific question to be solved, then please specify the question number or post only that question. Average Total Cost (ATC): It is the cost per unit produced. It can be derived by the sum of average fixed cost (AFC), and average variable cost (AVC). ATC = AFC + AVC It can also be derived by dividing the total cost by total units produced. ATC = TCQ Initially, when total units of output increase it will lead to a decline in the average total cost. When the average total cost reaches the lowest point, at that point the level of output indicates the maximum output at minimum cost. Any increase in production beyond that point will result in an increase in the average total cost. The behavior of the average total cost can be explained through the following diagram: The above diagram represents the average total cost curve. In the beginning, as the output increases, the ATC curve falls due to the predominance of falling average fixed cost (AFC) curve. At the 'OQ' level of output, the average total cost is 'EQ' which minimum. After this point, an increase in the output or production will increase the average total cost (ATC). Therefore, the ATC curve is in 'U' shape. So, we can conclude that as a firm increases production, the average total cost (ATC) may either increase or decrease, it depends on whether it has reached its minimum point or not. Hence, option (d) is correct.

Answered: 1)As a firm increases production,…

Business

Economics

1)As a firm increases production, average total cost _____. a will stay the same b will decrease c will increase d may either increase or decrease

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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Question

1)As a firm increases production, average total cost _____.

a	will stay the same
b	will decrease
c	will increase
d	may either increase or decrease

2) As a firm increases production, total cost _____.

a	will stay the same
b	will decrease
c	will increase
d	may either increase or decrease

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