Chapter 55, Problem 2FRQ

To determine

The realistic swoosh-shaped MC curve, ATC, AVC, and AFC of a firm on the graph.

Explanation of Solution

The realistic swoosh-shaped MC, ATC, AVC, and AFC curves of a firm can be represented on the graph as:

  

Here, the MC curve is swoosh-shaped, and ATC and AVC curves are U-shaped. The marginal cost curve intersects both AVC and AFC curves from their minimum point on the graph. This happens, because at the lowest point costs are equal to each other. When the marginal cost is increasing above the average, the average cost is also started increasing which means that time, average cost curves start rising upward. The change in cost divided by the change in quantity represents the point of the marginal cost of a product. The change in cost or price affects the total cost curve (ATC) for the factor of production. As the quantity of a commodity increases, then the average variable cost is started diminishing but after a point where it reached its minimum then it again starts increasing.

Economics Concept Introduction

Introduction: The marginal cost curve represents the change in output and the change in total cost. The average total cost curve depends on the total cost and total quantity.