To explain:
The relation between the shapes of productivity and cost curves. Give a comparisonbetween the APP curve with
Explanation of Solution
The production curve, which is the APP curve, has input on the horizontal axis and output on the vertical axis. Now, when the input changes, the output reacts and the curve is made. In other words, when there is an increase in the inputs, output rises at the initial stage at higher rate, then at slower rate, and after a stage starts declining. On the other hand, in the cost curve, which is ATC curve, the output is represented on the horizontal axis and cost of input is represented on the vertical axis. In this curve, in the starting stage, the cost decreases at a higher rate, then at a slower rate and after a stage starts increasing when the production of output is raised.
The production curve, which is MPP curve, is same as the APP curve and has the same curve and trend on the curve. On the other hand, cost curve, which is the MC curve, is same as ATC curve and has the same curve and trend on the curve.
Productivity Curve:
This curve shows that when there is an increase in the variable resources, then in the initial stage, output increases at a higher rate, then at a slower rate, and then after a stage it may start to decline. The reason behind these changes is the law of diminishing marginal returns.
Cost Curves:
This curve shows the changes in the cost of production at each level of output, which means in the initial stage, cost of production decreases at a higher rate, then at a slower rate, and then after a stage it starts increasing. The reason behind this is also the law of diminishing marginal returns.
Want to see more full solutions like this?
Chapter 22A Solutions
Economics:
- Explain why the average variable cost curve and the average total cost curve get closer to each other as output increases.arrow_forwardGraphically show the relationship between the Avg. Variable Cost, Avg. Total Cost, and Marginal Cost curves. What question does the MC curve (along with the MR curve) answer What question does the ATC curve (along with the AR curve) answer? What question does the AVC curve (along with the AR curve) answer?arrow_forwardIf you assume that a firm has a U-shaped average cost curve, why would large and small firms have higher costs than middle-sized firms?arrow_forward
- Construct the marginal cost, average cost and average variable cost curves. You may use a computer- generated diagram.arrow_forwardThe cost curve for producing widgets passes through the following points and is piecewise linear in between. Solve, f. What is the fixed cost per unit for producing 1,000 widgets? g. What is the variable cost per unit for producing 1,000 widgets?arrow_forward4. Various measures of cost Douglas Fur is a small manufacturer of fake-fur boots in San Francisco. The following table shows the company's total cost of production at various production quantities. Fill in the remaining cells of the following table. Average Variable Cost (Dollars per pair) Average Total Cost (Dollars per pair) Quantity Total Cost Marginal Cost Fixed Cost Variable Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) 120 1 210 2 270 3 315 4 380 5 475 630arrow_forward
- Why is having a business objective of increased economies of scale always desirable?arrow_forwardUse the following figure to answer the next question. 0 A B MC ATC AVC At which point does marginal cost (MC) equal average variable cost (AVC)?arrow_forwardin your own personal life, what are some fixed and variable costs you have?arrow_forward
- Graph the following: Average Total Cost curve and Average Variable Cost curve with proper positioningarrow_forwardYou are told that the marginal cost of production is increasing. Is it possible to determine whether the average variable cost is increasing or decreasing? Use a diagram to explain your answer.arrow_forwardDouglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company’s total cost of production at various production quantities. On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC and AVC, plot the points on the integer; for example, the ATC of producing one pair of boots is $155, so you should start your ATC curve by placing a green point at (1, 155). For MC, plot the points between the integers: For example, the MC of increasing production from zero to one pair of boots is $95, so you should start your MC curve by placing an orange square at (0.5, 95).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.arrow_forward
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning