In U-Shaped Average Total Cost Curve above Section 11.4 exhibit 2, why does AFC continue to fall even while ATC rises at very high output? Section 11.4U-Shaped Average TotalCost Curveexhibit 2High AFCHigh ATCHigh MCHigh ATCMCАТСMinimumof ATCDiminishing marginalproduct sets inAFC9SMALLQuantity of OutputLARGEAt low levels of output, ATC is high because AFC is high-thefixed plant is underutilized. At high levels of output (close tocapacity), the fixed plant is overutilized, leading to high MC and,consequently, high ATC. It is diminishing marginal product thatcauses the MC, and eventually the AVC and ATC, to rise.Cost per Unit (dollars)

Average fixed cost (AFC) refers to the total fixed cost (TFC) per unit of output AFC = TFC/Q Where Q…

Answered: In U-Shaped Average Total Cost Curve…

In U-Shaped Average Total Cost Curve above Section 11.4 exhibit 2, why does AFC continue to fall even while ATC rises at very high output?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Distinguish between Fixed Costs and Variable Costs and their implications for the shape of firms’…

A: Fixed Costs : These are the costs which do not change or depend on the level of production . For…

Q: Answer the question on the basis of the following cost data. \table[[Output, \table[[Average Fixed],…

A: Total fixed cost does not change with the quantity Therefore, the total fixed cost for 1 unit at…

Q: 19) At what output is the value for the new AC at its minimum?

A: Average Cost (AC) is the total cost of producing a certain quantity of output divided by the…

Q: Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only…

A: Given: To Find: The short-run total cost if Ike's Bikes is currently producing 600 bikes: The…

Q: Jaskier can only produce output in integer units. His Fixed cost is $200 and his Variable Cost of…

A: ATC is the average total cost which is per unit of output. ATC=TCQ Fixed Cost is given as $200.

Q: The above cost curves are for a firm producing flour, which is measured in pounds. 1. What is the…

A: A cost curve is a graph that shows the costs of production as a function of the overall quantity…

Q: ATC is decreasing, is ATC is above (greater), equal, or less (below) than MC? ________ choose one…

Q: The marginal-cost (MC) curve and the average-variable-cost (AVC) curve are same images of the…

A: MC is the cost which is associated with the MP and the cost which is associated with the AP is the…

Q: Long-Run Marginal Costs Like all average cost curves, the long-run (LATC) curve has its own marginal…

A: In a market, marginal cost and average cost are related to each other to some extent.

Q: Consider a single-product firm and its total cost function: TC (Q)=60Q-20Q2+Q3. For what level of…

A: Economies of scale refers to the situation when firm's average total cost decreases with increase in…

Q: A firm with only fixed costs will have which of the following average cost relationships? As…

A: Average Total Cost is calculated by dividing the total cost with units of output. Average Cost =…

Q: When marginal cost curve is below an average cost curve, marginal cost O may be increasing or…

A: There is a significant relationship between the marginal cost curve and average cost curve as the…

Q: The MC curve must be * rising when TC is rising. less than AFC when the average cost is rising.…

A: Every production unit incurs certain amount of costs during production processes. These costs are…

Q: is given ost for producing 15 units of outpu" s 3000 and for 16 units is 3,500 "ind the value of…

Q: A firm with fixed cost (FC) of $150, average variable cost (AVC) of $2.5 and average total cost…

A: Fixed cost is the cost that does not change with the change in output. Average fixed cost is the…

Q: Why will firms in most markets be located at or close to the bottom of the longrun average cost…

A: Note: In the BNED Guidance, only the first question can be answered at a time. Resend the question…

Q: Please no written by hand and no emage Which of the following is correct about the short-run…

A: Average total cost ATC is equal to total cost divided by level of output Q.ATC = TC/QMarginal cost…

Q: AVC = 88−0.026Q + 0.000003Q2 Greene Enterprises faces total fixed costs (TFC) of $300,000. When…

A: The average variable cost is the variable cost per unit of output. Variable cost is the cost is…

Q: Suppose each firm of the industry has a short-run total cost curve of TC = 5+4q+q², where q is…

A: Total cost of production refers to the total monetary value incurred on fixed as well as variable…

Q: Due to the diminishing marginal returns in the short run production, for a typical firm, in the…

A: Diminishing marginal returns refers to the situation when firm is facing an increase in marginal…

Q: If a firm enjoys economies of scale up to a certain output level, and cost then increases…

A: The LRAC curve depicts the relationship between the average cost and the level of output produced in…

Q: Average Variable Costs: b. Identify Expressions for Average Variable and Average Total Cost Average…

A: Total cost is the sum of Fixed and variable cost. Fixed cost is the cost that remains same at all…

Q: 2.2 A firm's short-run cost function is c() = 2009-692 +0.393 +400. Determine the fixed cost, F; the…

A: The short run total cost function is the sum of fixed and variable cost functions. CS(q) = F + V(q)…

Q: An economist estimated that the cost function of a single-product firm is: C(Q) = 70 + 30Q + 20Q2 +…

A: This analysis investigates the cost structure of a single-product firm based on the provided cost…

Q: Eccles Incorporated (based in Ogden) manufactures precision steel sprockets for applications…

Q: Which of the following statements regarding average fixed costs is correct? Select one : A) They…

A: The fixed cost is the short-run concept. In the short run, factors of production like land, capital,…

Q: Long Run Costs curves [are | are not ] always U-shaped. One way to prove this is to look at…

A: LRAC depicts the lowest possible average production cost, allowing entire production inputs to vary…

Q: How the shape of the total variable cost curve (TVC) and total cost curve (TC) is related with the…

A: Cost refers to the financial valuation of products and services purchased by manufacturers and…

Q: Suppose each firm of the industry has a short-run total cost curve of C=5+2q+q2, where q is output…

A: Total cost is the total cost of producing the goods. Total cost is the sum of total fixed cost and…

Q: Discuss in detail the law of diminishing returns and how it explains the shape of the short-run…

A: The law of diminishing marginal utility (MU) describes, how there can be a maximum utility for the…

Q: Assume that Peter's short run Total Cost Curve is TC = 20,000q- 200q² +q*. Calculate his (short run)…

A: Average total cost is total cost divided by quantity. ATC = TC / q => ATC = (20,000q - 200q2 +…

Q: With fixed costs of $400, a firm has average total costs of $3 and average variable costs of $2.50.…

A: Given: Total Fixed Cost = 400. Average Total Cost = $3 Average Variable Cost = $2.50

Q: When the ATC curve is falling, MC is ATC. less than greater than equal to

A: Total cost is the cost of producing all the goods. Average total cost is the cost of production per…

Q: Discuss the relationship, with the use of a graphical illustration(prefferably visual), of the…

A: Ans. Law of Diminishing Marginal return. The law of Diminishing Marginal return is economic concept.…

Q: Discuss the relationship, with the use of a graphical illustration(virtual), of the firm's total…

A: According to the law of diminishing marginal returns, every production process will eventually reach…

Q: The table below represents incomplete information on the short-run production costs for a firm,…

A: Cost refers to the monetary payment made by a business in order to produce any good or service. It…

Q: firm’s total fixed cost is $360,000. Construct a table of its total and average fixed costs for…

A: The firm’s total fixed cost is given as $360,000. The table can be constructed as follows : TFC :…

Q: Explain why the red curve is an incorrect representation of a long-run average cost curve. Note: the…

A: The average cost is the called the per unit cost of production. The AC = TC/Q. The long run Average…

Q: Use your knowledge of cost functions to calculate the missed cost data in the accompanying table.…

A: The cost function refers to a function of the prices of inputs and quantity of output whose value is…

Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

In U-Shaped Average Total Cost Curve above Section 11.4 exhibit 2, why does AFC continue to fall even while ATC rises at very high output?

Section 11.4
U-Shaped Average Total
Cost Curve
exhibit 2
High AFC
High ATC
High MC
High ATC
MC
АТС
Minimum
of ATC
Diminishing marginal
product sets in
AFC
9SMALL
Quantity of Output
LARGE
At low levels of output, ATC is high because AFC is high-the
fixed plant is underutilized. At high levels of output (close to
capacity), the fixed plant is overutilized, leading to high MC and,
consequently, high ATC. It is diminishing marginal product that
causes the MC, and eventually the AVC and ATC, to rise.
Cost per Unit (dollars)

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

the following cost table. (Enter numeric responses rounded to two decimal places) \table[[Output (q), F, VC, C, MC, AFC, AVC,AC], [1, $250, $64, S314, S64, $250.00, S64.00, $314.00
Answer the question on the basis of the following cost data. Average Fixed Average Variable Output Cost Cost 1 $ 50.00 $ 100.00 2 25.00 80.00 3 16.67 66.67 4 12.50 65.00 5:35 5 10.00 68.00 6 8.37 73.33 7 7.14 80.00 8 6.25 87.50 The marginal cost of the sixth unit of output is Multiple Choice О $440.00. $8.37.
7) What is the relationship between AFC, AVC & ATC? How are these calculated? 8) A firms produces an output of 10 units, when their total cost is $50 and their fixed costs are $10. Find: VC, AFC, AVC & ATC. 9) What are two examples of fixed costs?
Drag and drop the approprate label into the appropiate spot on the genearlized long-run average cost curve shown below. per unit cost ($/Q) 0 constant returns to scale minimum efficient scale diminishing marginal returns quantity (Q) Q₂ increasing returns to scale caion decreasing returns to scale Activate Window Go to Settings to activa
Question 3 Discuss the relationship between Long-Run Average Cost and Short-Run Average Cost for a firm. Show this diagrammatically. What are the strategic implications of a Long-Run Average Cost curve showing existence of economies of scale?
A firm’s long-run total cost curve is given by: C(q) = 40q − 10q2 + q3 . Over what range of output does this technology exhibit decreasing returns to scale? Group of answer choices q>8 q<5 None of the above are correct. q>10 q>5 Note: don't use chat bot
The four statements below describe properties of a firm's short run cost curves. Complete the statements using words from the list given below. • The increase in total cost from producing an additional unit of output is called • Average cost is the total cost of When a firm's average cost curve crosses the marginal cost curve, average costs are When a firm's average cost is greater than marginal cost, then producing an additional unit of output will result in a fall in average cost marginal cost at a minimum at a maximum production production divided by the quantity of units produced
Question 3. 5q? + 0.5g. What are the fixed cost (F), the variable cost function (VC), the marginal cost (MC), the average cost (AC), the average fixed cost (AFC) and the average variable cost (AVcy? Suppose a firm has a short-run cost function: C(g) = 1000 + 200g - %3D
fixed cost is the same at each output level except when no output is produced. when a firm produces no output,there are no fix cost. true or false? explain
An economist estimated that the cost function of a single-product firm isC(Q) = 100 + 20Q + 15 Q^2 + 10 Q^3Based on this information, determine:b. The variable cost of producing 10 units of output.
ASAP!!
Jaskier can only produce output in integer units. His Fixed cost is $200 and his Total Cost of production for every quantity is given in the table below. What is his minimum Average Variable Cost? Q TC 1 322.31 2 344.24 3 380.79 4 406.53 5 511.2 6 578.16 7 800 8 782.84 9 907.11 10 1046