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Key Question A firm has fixed costs of $60 and variable costs as indicated in the table on the following page. Complete the table and check your calculations
a. Graph total fixed cost, total variable cost, and total cost. Elucidate how the law of diminishing returns influences the shapes of the variable-cost and total-cost curves.
b. Graph AFC, AVC, ATC, and MC. Explain the derivation and shape of each of these four curves and their relationships to one another. Specifically, explain in nontechnical terms why the MC curve intersects both the AVC and the ATC curves at their minimum points.
c. Elucidate how the location of each curve graphed would be altered if (1) total fixed cost had been $100 rather than $60 and (2) total variable cost had been $10 less at each level of output.
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