Economics
Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
Question
Book Icon
Chapter 11, Problem 4P
To determine

Concept Introduction:

Average Total Cost (ATC): It is also referred as the cost of a single unit, it includes the overall cost, that is the variable cost as well as the fixed cost. A firm should always maintain the price of a product above the ATC, otherwise it will result in a loss for the firm. The formula for ATC is:

    Economics, Chapter 11, Problem 4P , additional homework tip  1

Here,
  • AFC is the average fixed cost.
  • AVC is the average variable cost.
  • ATC is the average total cost.

Average fixed cost (AFC): Fixed cost is the cost which is constant for the firm irrespective of the output produced by the firm. So the AFC is the fixed cost per unit produced by the firm. The formula to calculate the average fixed cost is:

    Economics, Chapter 11, Problem 4P , additional homework tip  2

Here,

  • AFC is the average fixed cost
  • TFC is the total fixed cost
  • Q is the quantity of output.

Average variable cost: Variable cost is not a constant cost for the firm, it changes with the change in output. So the AVC is a per unit cost of that variable input. It is calculated as follows:

    Economics, Chapter 11, Problem 4P , additional homework tip  3

Here,
  • AVC is the average variable cost
  • TFC is the total fixed cost
  • Q is the quantity of output.

Blurred answer
Students have asked these similar questions
What are the 15 things/places/foods/culture or any strategies that could showcase the attractiveness of the Philippines to foreign investors? Use factual information in each strategies and discuss.
Two firms are competing in a Cournot duopoly. Both firms have the same constant marginal cost. The market demand is linear. Suppose the constant marginal cost of firm 2 is increasing. Which of the following statements are correct? [There may be more than one correct statement.]     The quantity of firm 1 and the quantity of firm 2 both go up.     The quantity of firm 1 goes up and the quantity of firm 2 goes down.     The market price goes down.     The market price goes up.     The quantity of firm 1 and the quantity of firm 2 go down.     The quantity of firm 1 goes down and the quantity of firm 2 goes up.     The market price stays the same.
evaluate the impact of government interventions, such as antitrust regulations, price controls, or subsidies, on various market structures. Select a specific industry and examine how these interventions have influenced competition, consumer welfare, and economic efficiency. Provide the pros and cons of government intervention.
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education