Average total cost, Microeconomics

Assignment Help:

Average Total Cost (ATC): ATC is the total cost per unit of output.

ATC = TC/y = (TFC + TVC)/y = AFC +AVC

ATC falls sharply at the beginning of the production process because both AVC and AFC are declining. When AVC begins rising but AFC is falling steeply, then the ATC continues to fall. Then the AVC rises sharply and offsets the fall in AFC causing the ATC to fall. The shape of the ATC curve is almost u-shaped.

• Marginal Cost (MC): MC is the addition to the total cost generated by increasing production by one unit. It is the slope of the TC curve.

Mathematically, MC = ΔTC / Δy.

The behaviour of the marginal product curve determines the MC curve, which is the inverse of the former.Before to attempt to plot the cost curves, it is important to know the rules of averages and marginal quantities. According to these mathematical rules,

When MC < AC then AC decreases.

When MC > AC then AC rises.

When MC = AC then average costs are at the minimum.


Related Discussions:- Average total cost

What is the sign of the cross price elasticity, Australians are turning to ...

Australians are turning to scooters to combat escalating petrol prices. After a slump in the March quarter this year, demand for scooters was up by more than 7 per cent in the firs

Production function curve, different types of production funtion and curve ...

different types of production funtion and curve given by different economist

Managerial econ, what will cause a firms demand curve to shift: a a change ...

what will cause a firms demand curve to shift: a a change in sellers profit associated with the good or service b change in technology for good cchange in non price variable in dem

Applyimg supply/denabde due to illness and hospital :), If a 10% increase ...

If a 10% increase in the price of computers leads to a 20% reduction in the quantity demanded, what is the coefficient of demand elasticity? 2. A local government wants to increase

Price change, 1.  Seller has ample time to adjust to price change. 2.  B...

1.  Seller has ample time to adjust to price change. 2.  Buyer's response to small price change is significant. 3.  Buyers are faced with many options when deciding to make a

Materials requirements calculations - mrp system, Materials Requirements Ca...

Materials Requirements Calculations - MRP System MRP is a computer-based 'engine' which carries out calculations in order to determine:  What is needed, and When i

Estimating and predicting cost, Estimating and Predicting Cost * Estima...

Estimating and Predicting Cost * Estimates of future costs can be obtained from a cost function, which relates cost of production to level of output and other variables which t

Problems relating to national income estimation, Problems relating to natio...

Problems relating to national income estimation: Changing prices of goods and services . Prices of goods and services do change from one period to another. This makes compari

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd