MC АТС $25.00 AVC $19.50 $15.00 $12.50- 30 40 50 60 Output (Q) The Short Run Supply Curve for the firm shown in the diagram above is its MC curve for any price greater than $12.50 $25.00 $15.00 O $19,50

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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### Understanding Cost Curves in Economics

This diagram illustrates several important cost curves for a firm: Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC).

#### Graph Details:

- **Vertical Axis (Price)**: Ranges from $12.50 to $25.00.
- **Horizontal Axis (Output Q)**: Measures quantities from 0 to 60 units.

#### Curves Explained:

1. **Marginal Cost (MC) Curve**:
   - Represented by the red line.
   - Initially decreases, reaches a minimum, then sharply increases.
   - Intersects both the ATC and AVC curves.

2. **Average Total Cost (ATC) Curve**:
   - Shown by the blue curve above the AVC curve.
   - U-shaped, reflecting economies and diseconomies of scale.
   - MC intersects ATC at its minimum point.

3. **Average Variable Cost (AVC) Curve**:
   - The lower blue curve.
   - Also U-shaped and intersected by MC at its minimum.

#### Key Intersections:

- At an output of around 30 units, all three curves meet, marking an important point for cost analysis.
- As output increases from 30 to 60, the MC curve rises above both AVC and ATC.

#### Question:

"The Short Run Supply Curve for the firm shown in the diagram above is its MC curve for any price greater than ________."

**Options:**
- $12.50
- $25.00
- $15.00
- $19.50

This question prompts learners to identify the price level above which the MC curve acts as the firm's short-run supply curve.
Transcribed Image Text:### Understanding Cost Curves in Economics This diagram illustrates several important cost curves for a firm: Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC). #### Graph Details: - **Vertical Axis (Price)**: Ranges from $12.50 to $25.00. - **Horizontal Axis (Output Q)**: Measures quantities from 0 to 60 units. #### Curves Explained: 1. **Marginal Cost (MC) Curve**: - Represented by the red line. - Initially decreases, reaches a minimum, then sharply increases. - Intersects both the ATC and AVC curves. 2. **Average Total Cost (ATC) Curve**: - Shown by the blue curve above the AVC curve. - U-shaped, reflecting economies and diseconomies of scale. - MC intersects ATC at its minimum point. 3. **Average Variable Cost (AVC) Curve**: - The lower blue curve. - Also U-shaped and intersected by MC at its minimum. #### Key Intersections: - At an output of around 30 units, all three curves meet, marking an important point for cost analysis. - As output increases from 30 to 60, the MC curve rises above both AVC and ATC. #### Question: "The Short Run Supply Curve for the firm shown in the diagram above is its MC curve for any price greater than ________." **Options:** - $12.50 - $25.00 - $15.00 - $19.50 This question prompts learners to identify the price level above which the MC curve acts as the firm's short-run supply curve.
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