Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 21, Problem 14CQ
To determine
Draw a U-shaped
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Explain the shapes of the marginal and average cost curves of a firm. Use a diagram to support your answer.
This is a graph of our firm’s costs. Label the lines on the graph using the following labels: average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) marginal cost (MC). Then label the shut down and breakeven points on the graph.
Using the multipoint curved line drawing tool, draw the firm's marginal cost curve. Label this curve 'MC'.
Chapter 21 Solutions
Economics: Private and Public Choice
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- Identify the economies of scale where the producer operates. Show cost curves of the firm graphically"arrow_forwardDiscuss the relationship, with the use of a graphical illustration(prefferably visual), of the firm's total product curve and its marginal cost curve. Hint: Law of diminishing marginal returns.arrow_forward“A firm that earns only normal profit is not covering all its costs.” Do you agree or disagree?arrow_forward
- Section 2: Long Answer 1. A firm has technology described by q = KL. Set out the firm's long-run cost minimization problem and find the first order conditions for a cost minimizing input choice. Briefly describe the economic interpretation of each condition.arrow_forwardDiscuss the relationship, with the use of a graphical illustration(virtual), of the firm's total product curve and its marginal cost curve. Hint: Law of diminishing marginal returns.arrow_forwardIf marginal cost is decreasing, what is happening to an average variable cost (decreasing, increasing) Note : don't use chat gptarrow_forward
- Show the effect of diminishing returns on the marginal and average cost curves of a firm in the short-run. (be sure to explain your diagrams)arrow_forwardIn the long run, fixed costs arearrow_forwardEach graph below illustrates three short run cost curves for firms, where ATC is Average Total Cost (aka Average Cost), MC is Marginal Cost, and AVC is Average Variable Cost. Based on what you know about the relationships between these curves, which of the following graph is correct? MC ATC ATC AVC AVC B. MC MC ATC AVC ATC AVC D. MC AVC ATC E. D. OAarrow_forward
- Vinnie’s Painting Company specializes in painting houses. Their cost schedule is as follows:Output TFC TVC TC AFC AVC ATC MC 0. 10001. 1002. 1003. 4004. 4505. 16006. 32007 6400 A) Given the partial data available, finish the table and calculate all the costs. B)What is the minimum efficient scale of Vinnie’s company?C)What is the marginal cost of 6 houses?D)If Vinnie charges $825 per house, how many houses he should paint to maximize profitarrow_forwardThe table below reflects the short run costs of production of a manufacturer of stationery.Complete the table by writing out the letters A to E in your answer book along with the correctlycalculated cost applicable to each letterarrow_forwardWe expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. What might explain this?arrow_forward
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