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

Demand and supply, technological advance reduced the cost of computer chips...

technological advance reduced the cost of computer chips . explain using the demand and supply diagrams , how the the following markkets are affected in terms of price and quantiti

What are the three major types of unemployment, What are the three major ty...

What are the three major types of unemployment?   a) Frictional b) Structural and c) Cyclical unemployment. Cyclical unemployment is broadly spread by an economy durin

Define benefit pensions, Defined Benefit Pensions: A pension plan that pays...

Defined Benefit Pensions: A pension plan that pays a specified monetary benefit, generally based on a pensioner's years of service and their income at the time of retirement.

Distinguish between economic growth and economic development, Question 1: ...

Question 1: (a) Describe the different forms that foreign aid may take. (b) Does foreign aid lead to economic growth? Discuss. Question 2: (a) Distinguish between ec

Price elasticity of supply, Price elasticity of supply – Computes the p...

Price elasticity of supply – Computes the percentage change in quantity supplied resulting from a 1 percent variation in price. – The elasticity is usually positive as price

Traditional economy , what is traditional economy 2 features of traditional...

what is traditional economy 2 features of traditional economy

Gdp price level, GDP Price Level At the equilibrium level of income agg...

GDP Price Level At the equilibrium level of income aggregate spending in the economy equals aggregate output. All along, we have assumed that the general price level remains un

Mrs and mrts, compare marginal rate of technical substitution and marginal ...

compare marginal rate of technical substitution and marginal rate of substitution

Describe the trade triangles, Steel and aluminum production Steel Canada 50...

Steel and aluminum production Steel Canada 500, France 1200 Aluminum Canada 1500, France 800 The maximum amount of steel or aluminum that Canada and France can produce if they full

Theory of supply, how to make attractive assignment on theory of supply

how to make attractive assignment on theory of supply

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