The relationship between marginal and average costs Consider the following scenario to understand the relationship between marginal and average values. Suppose Jacques is a professional basketball player, and his game log for free throws can be summarized in the following table. Fill in the columns with Jacques’s free-throw percentage for each game and his overall free-throw average after each game. Game Game Result Total Game Free-Throw Percentage Average Free-Throw Percentage 1 8/10 8/10 80 80 2 6/10 14/20 3 1/5 15/25 4 3/5 18/30 5 8/10 26/40 On the following graph, use the orange points (square symbol) to plot Jacques’s free-throw percentage for each game individually, and use the green points (triangle symbol) to plot his overall average free-throw 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. Game Free-Throw PercentageAverage Free-Throw Percentage0123451009080706050403020100FREE-THROW PERCENTAGEGAME You can think of the result in any one game as being Jacques’s marginal free-throw percentage. Based on your previous answer, you can deduce that when Jacques’s marginal free-throw percentage is below the average, the average must be . 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 . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be . Therefore, the marginal cost curve intersects the average total cost curve

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

Consider the following scenario to understand the relationship between marginal and average values. Suppose Jacques is a professional basketball player, and his game log for free throws can be summarized in the following table.

Fill in the columns with Jacques’s free-throw percentage for each game and his overall free-throw average after each game.

Game	Game Result	Total	Game Free-Throw Percentage	Average Free-Throw Percentage
1	8/10	8/10	80	80
2	6/10	14/20
3	1/5	15/25
4	3/5	18/30
5	8/10	26/40

On the following graph, use the orange points (square symbol) to plot Jacques’s free-throw percentage for each game individually, and use the green points (triangle symbol) to plot his overall average free-throw 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.

Game Free-Throw PercentageAverage Free-Throw Percentage0123451009080706050403020100FREE-THROW PERCENTAGEGAME

You can think of the result in any one game as being Jacques’s marginal free-throw percentage. Based on your previous answer, you can deduce that when Jacques’s marginal free-throw percentage is below the average, the average must be .

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 . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be . Therefore, the marginal cost curve intersects the average total cost curve .

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