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Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. The firm's total fixed cost is: O A. $2,800. O B. $3,000. OC. $4,500. O D. $7,000.

Figure 8.3 shows a firm's marginal cost, average total cost, and average variable cost curves. The firm's total fixed cost is: O A. $2,800. O B. $3,000. OC. $4,500. O D. $7,000.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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### Cost Analysis of a Firm **Figure 8.3 Analysis** Figure 8.3 illustrates a firm's cost structures, specifically the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves. Understanding these curves is crucial for analyzing the cost behaviors of a firm. #### Graph Details - **Axes**: - The vertical axis represents the cost in dollars ($). - The horizontal axis represents the quantity of output (Q). - **Curves**: - **Marginal Cost (MC)**: This curve typically is U-shaped and intersects both the ATC and AVC curves. In this graph, the MC curve is shown rising sharply after initially declining slightly. - **Average Total Cost (ATC)**: This curve shows the total cost per unit of output produced, encompassing both fixed and variable costs. It is depicted as a U-shaped curve. - **Average Variable Cost (AVC)**: The AVC curve also displays a U-shape but lies below the ATC at any level of output, as it includes only variable costs per unit. - **Intersection Points**: - The MC curve intersects the ATC and AVC curves at their minimum points, which is a common characteristic of cost curves. #### Question The question on the left side of the image asks to determine the firm's total fixed cost based on the information provided. It presents four options: - A. $2,800 - B. $3,000 - C. $4,500 - D. $7,000 To find the total fixed cost, one must understand that fixed cost is the difference between total cost and variable cost at any output level. By analyzing the graph and calculating based on AVC and ATC where they meet quantity levels, the fixed cost can be inferred. This figure effectively demonstrates the relationships and interactions between these fundamental cost curves in economic analysis.
Transcribed Image Text:### Cost Analysis of a Firm **Figure 8.3 Analysis** Figure 8.3 illustrates a firm's cost structures, specifically the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves. Understanding these curves is crucial for analyzing the cost behaviors of a firm. #### Graph Details - **Axes**: - The vertical axis represents the cost in dollars ($). - The horizontal axis represents the quantity of output (Q). - **Curves**: - **Marginal Cost (MC)**: This curve typically is U-shaped and intersects both the ATC and AVC curves. In this graph, the MC curve is shown rising sharply after initially declining slightly. - **Average Total Cost (ATC)**: This curve shows the total cost per unit of output produced, encompassing both fixed and variable costs. It is depicted as a U-shaped curve. - **Average Variable Cost (AVC)**: The AVC curve also displays a U-shape but lies below the ATC at any level of output, as it includes only variable costs per unit. - **Intersection Points**: - The MC curve intersects the ATC and AVC curves at their minimum points, which is a common characteristic of cost curves. #### Question The question on the left side of the image asks to determine the firm's total fixed cost based on the information provided. It presents four options: - A. $2,800 - B. $3,000 - C. $4,500 - D. $7,000 To find the total fixed cost, one must understand that fixed cost is the difference between total cost and variable cost at any output level. By analyzing the graph and calculating based on AVC and ATC where they meet quantity levels, the fixed cost can be inferred. This figure effectively demonstrates the relationships and interactions between these fundamental cost curves in economic analysis.
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