Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 7, Problem 7.4IP
To determine
The relationship between average and marginal costs.
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Explain the theoritical relationship between average variable cost and the marginal cost
The statements and equations show various ways of defining average variable cost, marginal cost, and average total cost. TC is used to abbreviate total cost, VC is used to abbreviate variable cost, and Q is used to abbreviate quantity. Classify each statement or equation according to whether it describes average variable cost, marginal cost, or average (total) cost.
Change in the total cost divided by the change in output
The sum of all cost that change as output changes divided by the number of units produced
Change in TC/change in Q
The amount by which total cost increases when an additional unit is produced
VC/Q
TC/Q
Total cost divided by quantity of output
Average Variable cost
Marginal cost
Average (total) cost
Marginal cost is the slope of both the average variable cost and the variable cost functions.
Select one:
True
False
Chapter 7 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- When the marginal cost curve lies below the average total cost curve, it is true that as output increases A marginal cost is decreasing marginal cost is increasing average total cost is decreasing average total cost is increasing average variable cost is decreasingarrow_forwardDouglas Fur is a small manufacturer of fake-fur boots in New York City. The following table shows the company’s total cost of production at various production quantities.arrow_forwardExplain the relationship between the production function and the average costs and marginal costs curve of a firm.arrow_forward
- An accountant for a car rental company was recently asked to report the firm's costs of producing various levels of output. The accountant knows that the most recent estimate available of the firm's cost function is C(Q) = 100 + 10Q + Q^2, where costs are measured in thousands of dollars and output is measured in thousands of hours rented. a. What is the average fixed cost of producing 2 units of output? b. What is the average variable cost of producing 2 units of output? c. What is the average total cost of producing 2 units of output? d. What is the marginal cost of producing 2 units of output? e. What is the relation between the answers to (a), (b), and (c) above? Is this a general property of average cost curves?arrow_forwardmathematically, marginal cost is expressed asarrow_forwardMarginal cost is given by the slope of total variable cost (TVC) curve, but not the slope of the total cost TC curve the slope of the total cost curve, but not by the slope of the TVC curve O the slope of the total fixed cost (TFC) curve either the slope of the TVC or the slope of the TC curvearrow_forward
- Economic cost is equal to the sum of the explicit and the implicit costs True Falsearrow_forwardA firm faces the following table of costs for various levels of production, if they can sell their product for Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost Q 0 10 9 2.00 11.00 2.00 30 3.00 1.00 4.00 0.50 45 2.00 1.11 3.11 1.33 55 1.64 1.29 2.93 2.10 If the firm can sell their product for $1.33 they will [Select] short-run and [Select] V in the long run. in thearrow_forwardplease helparrow_forward
- Question 4: Marginal and Average Cost curves Suppose the cost function is given by C(Q)= Q²-2Q +16. a) Find the marginal cost function b) Find the average cost function c) Find the quantity where the MC cost and the AC cost curve intersectarrow_forwardSolve for the following: a. Marginal Cost b. Average Cost Suppose that a food manufacturing company’s cost function is given by the following equation: (in the picture)arrow_forwardWhich of the following statements is a reflection of the fact that the average fixed cost falls as output rises? 1) The gap between the average total cost curve and the average variable cost curve becomes smaller as output rises. 2) The gap between the average total cost curve and the average variable cost curve remains the same as output rises. 3) The gap between the average total cost curve and the average variable cost curve becomes bigger as output rises. 4) The average total cost curve intersects the average variable cost curve in the long run.arrow_forward
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