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The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (ATC) and the long-run average total cost curve (LRATC); for example, Qi marks the point of tangency between ATC and LRATC. The orange point on ATC3 indicates the firm's current output level in the short run (Q3). ATC, ATC, LRATO ATC2 ATC, ATC, 3D Q, OUTPUT COST PER UNIT

The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marked quantities indicate points of tangency between each short-run average total cost curve (ATC) and the long-run average total cost curve (LRATC); for example, Qi marks the point of tangency between ATC and LRATC. The orange point on ATC3 indicates the firm's current output level in the short run (Q3). ATC, ATC, LRATO ATC2 ATC, ATC, 3D Q, OUTPUT COST PER UNIT

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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The graph illustrates the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The graph identifies five key quantities indicating points of tangency between each short-run average total cost curve (ATC) and the long-run average total cost curve (LRATC). For instance, \( Q_1 \) represents the point of tangency between \( ATC_1 \) and \( LRATC \). The orange point on \( ATC_3 \) denotes the firm's current output level in the short run (\( Q_3 \)). **Graph Explanation:** - The vertical axis represents the cost per unit, while the horizontal axis represents the output. - The curve labeled \( LRATC \) is the long-run average total cost curve, depicted in purple. - Five short-run average total cost curves (\( ATC_1 \), \( ATC_2 \), \( ATC_3 \), \( ATC_4 \), \( ATC_5 \)) are shown, each having a point of tangency with the \( LRATC \). - Dotted vertical lines mark the quantifiable points \( Q_1, Q_2, Q_3, Q_4, \) and \( Q_5 \), which are the output levels at which tangency occurs. - The orange square at \( Q_3 \) on \( ATC_3 \) signifies the firm's short-run output point.
Transcribed Image Text:The graph illustrates the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The graph identifies five key quantities indicating points of tangency between each short-run average total cost curve (ATC) and the long-run average total cost curve (LRATC). For instance, \( Q_1 \) represents the point of tangency between \( ATC_1 \) and \( LRATC \). The orange point on \( ATC_3 \) denotes the firm's current output level in the short run (\( Q_3 \)). **Graph Explanation:** - The vertical axis represents the cost per unit, while the horizontal axis represents the output. - The curve labeled \( LRATC \) is the long-run average total cost curve, depicted in purple. - Five short-run average total cost curves (\( ATC_1 \), \( ATC_2 \), \( ATC_3 \), \( ATC_4 \), \( ATC_5 \)) are shown, each having a point of tangency with the \( LRATC \). - Dotted vertical lines mark the quantifiable points \( Q_1, Q_2, Q_3, Q_4, \) and \( Q_5 \), which are the output levels at which tangency occurs. - The orange square at \( Q_3 \) on \( ATC_3 \) signifies the firm's short-run output point.
### Long-Run Firm Decisions and Efficient Scale #### Question 1 In the long run, if the firm decides to keep output at its initial level, what will it likely do? - ○ Shut down - ○ Shift to operate on \( ATC_1 \) - ○ Shift to operate on \( ATC_2 \) - ○ Stay on \( ATC_3 \) #### Question 2 At which output level (or range of output levels) is this firm producing at the minimum efficient scale? - ○ \( Q_2 \) - ○ 0 to \( Q_3 \) - ○ \( Q_4 \) - ○ \( Q_2 \) to \( Q_4 \) - ○ \( Q_3 \) ### Explanation In economics, determining a firm's position on the Average Total Cost (ATC) curve is crucial for understanding its efficiency and cost management. The minimum efficient scale represents the lowest point where the firm can produce at the least cost per unit. This exercise helps explore potential long-run strategies and production levels for optimizing costs.
Transcribed Image Text:### Long-Run Firm Decisions and Efficient Scale #### Question 1 In the long run, if the firm decides to keep output at its initial level, what will it likely do? - ○ Shut down - ○ Shift to operate on \( ATC_1 \) - ○ Shift to operate on \( ATC_2 \) - ○ Stay on \( ATC_3 \) #### Question 2 At which output level (or range of output levels) is this firm producing at the minimum efficient scale? - ○ \( Q_2 \) - ○ 0 to \( Q_3 \) - ○ \( Q_4 \) - ○ \( Q_2 \) to \( Q_4 \) - ○ \( Q_3 \) ### Explanation In economics, determining a firm's position on the Average Total Cost (ATC) curve is crucial for understanding its efficiency and cost management. The minimum efficient scale represents the lowest point where the firm can produce at the least cost per unit. This exercise helps explore potential long-run strategies and production levels for optimizing costs.
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