Answered: The following scenario examines the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. The relationship between marginal and average costs

The following scenario examines the relationship between marginal and average values. Suppose Nalah is a high school basketball player. The following table presents their game-by-game results for foul shots.

Fill in the columns with Nalah’s foul-shooting percentage for each game and their overall foul-shooting average after each game.

Game	Game Result	Total	Game Foul-Shooting Percentage	Average Foul-Shooting Percentage
1	8/10	8/10	80	80
2	4/10	12/20
3	2/8	14/28
4	2/4	16/32
5	6/8	22/40

On the following graph, use the orange points (square symbol) to plot Nalah’s foul-shooting percentage for each game individually, and use the green points (triangle symbol) to plot Nalah’s overall average foul-shooting percentage after each game.

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

You can think of the result in any one game as being Nalah’s marginal shooting percentage. Based on your previous answer, you can deduce that when Nalah’s marginal shooting percentage is above the average, the average must be ( falling or rising).

You can now apply this analysis to production costs. For a U-shaped average total cost (ATC) curve, when the marginal cost curve is below the average total cost curve, the average total cost must be (falling or rising). Also, when the marginal cost curve is above the average total cost curve, the average total cost must be (falling or rising). Therefore, the marginal cost curve intersects the average total cost curve ( at its minimum, at its maximum, or when the ATC is at 0.

COSTS (Dollars per pair)
200
175
150
125
100
75
8
50
25
2
3
QUANTITY (Pairs of boots)
5
6
ATC
AVC
MC

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