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P Q2 Q3 Q4 Q5 Q MC ATC AVC If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its curve to shift

P Q2 Q3 Q4 Q5 Q MC ATC AVC If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its curve to shift

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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According to the screen shot of the graph attached:

If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its ________ curve to shift ________.

 

 

## Analysis of Cost Curves in Microeconomics ### Description of the Graph This graph illustrates three key cost curves commonly analyzed in microeconomics: 1. **Marginal Cost (MC) Curve**: This upward-sloping curve represents the additional cost of producing one more unit of output. It is typically U-shaped. 2. **Average Total Cost (ATC) Curve**: This curve shows the average cost per unit of output, including all fixed and variable costs. It generally has a U-shape and lies above the AVC curve. 3. **Average Variable Cost (AVC) Curve**: This curve illustrates the average of all variable costs associated with production. It tends to be U-shaped and lies below the ATC curve. The horizontal axis is labeled "Q" representing the quantity of output, while the vertical axis is labeled "P," representing the price or cost level. Vertical dotted lines are drawn at different levels of output, labeled Q1 through Q5, indicating specific quantities of interest. ### Scenario Analysis Below the graph, there is a statement prompt: "If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its _______ curve to shift _______." **Interpretation**: An increase in fixed costs, such as rent, would impact the Average Total Cost (ATC) curve, shifting it upwards. This shift reflects the higher overall cost per unit when fixed costs increase. The Marginal Cost (MC) and Average Variable Cost (AVC) curves remain unaffected by changes in fixed costs.
Transcribed Image Text:## Analysis of Cost Curves in Microeconomics ### Description of the Graph This graph illustrates three key cost curves commonly analyzed in microeconomics: 1. **Marginal Cost (MC) Curve**: This upward-sloping curve represents the additional cost of producing one more unit of output. It is typically U-shaped. 2. **Average Total Cost (ATC) Curve**: This curve shows the average cost per unit of output, including all fixed and variable costs. It generally has a U-shape and lies above the AVC curve. 3. **Average Variable Cost (AVC) Curve**: This curve illustrates the average of all variable costs associated with production. It tends to be U-shaped and lies below the ATC curve. The horizontal axis is labeled "Q" representing the quantity of output, while the vertical axis is labeled "P," representing the price or cost level. Vertical dotted lines are drawn at different levels of output, labeled Q1 through Q5, indicating specific quantities of interest. ### Scenario Analysis Below the graph, there is a statement prompt: "If the firm depicted in the graph had to pay higher rent to its landlord, we would expect its _______ curve to shift _______." **Interpretation**: An increase in fixed costs, such as rent, would impact the Average Total Cost (ATC) curve, shifting it upwards. This shift reflects the higher overall cost per unit when fixed costs increase. The Marginal Cost (MC) and Average Variable Cost (AVC) curves remain unaffected by changes in fixed costs.
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