Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Is average cost minimized at q= 2, q= 5, q= 10, or q= 15 for the cost curve graphed below? Provide reasoning for your answer.
Transcribed Image Text:**Graph Explanation:**
This graph represents the relationship between the variables \(q\) and \(C\).
- **Axes:**
- The horizontal axis (x-axis) is labeled as \(q\) and extends from 0 to 15.
- The vertical axis (y-axis) is labeled as \(C\) and ranges from 0 to 3,000.
- **Data Points and Curve:**
- There are four distinct data points plotted on the graph, which are connected by a curve.
- The curve illustrates a trend where, as \(q\) increases, \(C\) also increases at an accelerating rate, suggesting a nonlinear relationship.
- **Plot Details:**
- The data points are positioned approximately at \((2, 1,000)\), \((5, 1,200)\), \((10, 1,800)\), and \((15, 3,000)\).
- The curve indicates that as \(q\) increases, \(C\) grows more rapidly, demonstrating an exponential increase.
This kind of graph is commonly used to illustrate exponential growth or increases in costs, resource usage, or other variables in economics and scientific studies.
Expert Solution
Step 1
Average cost(AC) is minimized when q=10. At q=2, TC curve is increasing at increasing rate. At this stage the firm enjoys increasing returns to factor & hence AC does no minimize here.
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