Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 22, Problem 10E
To determine
To explain:
The reason for the minimum point of
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Why will firms in most markets be located at or close to the bottom of the long-run average cost curve?
At what level of output is average cost a minimum?
What is the average cost (AC) at that output?
What is the Marginal Cost (MC) at that output?
a) How do you derive the marginal cost (MC) curve of a firm?b) How are average variable cost (AVC) and marginal cost (MC) curvesrelated? Explain.
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- suppose the average variable cost of production is $15 when output equals 110 haircuts and $17.26 when output equals 140 haircuts. If the firm wants to maximize profit how many haircuts will it produce at what cost? explain your answer.arrow_forwardAt what level of output is minimum efficient scale realized?arrow_forwardWhen do firms decide to shut down production in the short run? Explain it. How is the short run average cost curve and the long run average cost curve shaped? What is the difference between them?arrow_forward
- What effect might a decrease in the demand for high definition television have on the short-run average total cost curve for this product ?arrow_forwardWhat is the term for the lowest level of output at which a firm's goods are produced at minimum long-run average total cost? the point of diminishing returns the minimum total product the minimum efficient scale the point of zero marginal costarrow_forwardExplain the shapes of the marginal and average cost curves of a firm. Use a diagram to support your answer.arrow_forward
- Suppose Honda's total cost of producing 4cars is $225000and its total cost of producing 5cars is $250000 .what is the average total cost of producing 5cars? What is the marginal cost of the fifth car? Draw the marginal cost curve and the average cost curve for a typical firm and explain why these curves cross where they do.arrow_forwardShow 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_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. Why?arrow_forward
- In the short run, the marginal cost of the first unit of output is $40, the average variable cost of producing three units of output is $32, and the marginal cost of producing the second unit of output is $32. What is the marginal cost of producing the third unit of output? (Correct answer is $24)arrow_forwardHow and why does a firm’s average-total-cost curve differ in the short run and in the long run?arrow_forwardThe cost function of a UC Irvine donut shop is: C(q)=10+ 10q + q?, so the marginal cost function is: MC= 10+ 2q. In these equations, q is the output in terms of boxes of donuts. (a) What is the firm's average cost curve? (Note: just write the equation, no graph necessary) What is the firm's average variable cost curve? (Note: just write the equation, no graph (b) necessary) (c) If the price of a box of donuts is $20, what is the optimal output for this firm?arrow_forward
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