If marginal cost is below average variable cost. If marginal cost is below average variable cost: A. both the average total cost and average variable cost are decreasing. B. average total cost is increasing but the average variable cost is decreasing. C. both the average total cost and average variab 2022-10-21

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If marginal cost is below average variable cost, it means that the cost of producing one more unit of a good or service is less than the average cost of producing all units up to that point. This can occur when a company has economies of scale, which means that the cost of producing each additional unit decreases as the company increases its production.

There are several reasons why marginal cost may be below average variable cost. One reason is that fixed costs, such as rent and salaries, are spread out over a larger number of units as production increases. This can lead to a decrease in the average variable cost per unit. Another reason is that as production increases, a company may be able to take advantage of specialized equipment or processes that allow it to produce goods more efficiently. This can also lead to a decrease in the average variable cost per unit.

When marginal cost is below average variable cost, it can be beneficial for a company to increase production. This is because the cost of producing each additional unit is less than the average cost of producing all units up to that point. As a result, the company can increase its profits by producing and selling more units.

However, it is important for a company to consider all of its costs, including fixed costs, when deciding whether to increase production. If fixed costs are high, a company may not be able to make a profit even if marginal cost is below average variable cost. In addition, a company should consider other factors, such as market demand and competition, when deciding whether to increase production.

In summary, if marginal cost is below average variable cost, it can be beneficial for a company to increase production in order to increase profits. However, it is important for the company to consider all of its costs and other factors when making this decision.

What happens if average cost is greater than marginal cost?

if marginal cost is below average variable cost

ABC will soon go out of business. C Both I and II are true. Adding five more cakes may simply take advantage of that employee's extra capacity and the previously unused space in the over, which would mean that the marginal cost of each of those additional cakes would be low. ADVERTISEMENTS: AVC is obtained by dividing the total variable cost by output, i. Which of the following is true about the relationship between average cost curve AC and marginal cost curve MC? There are economies of size as long as it costs less at the margin to produce than on average MC What is the relation between MC and AVC? Example 4 Lincoln Inc. As a result, demand for electricity sharply increased and the price of electricity rose sharply.

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If marginal cost is below average variable cost: A. both the average total cost and average variable cost are decreasing. B. average total cost is increasing but the average variable cost is decreasing. C. both the average total cost and average variab

if marginal cost is below average variable cost

The firm has a U-shaped:. Why does AVC fall and then rise? Which of the following is true on the relationship between marginal cost MC and average total cost ATC? D the marginal product of waste water only. Fill in the column for average total cost. Jodi Beggs A similar relationship holds between marginal cost and average variable cost. When marginal product is rising, marginal cost is falling; and when marginal product is falling, marginal cost is rising.


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Relationship Between Marginal Cost & Average Variable Cost

if marginal cost is below average variable cost

On the other hand, when MC is less than AC, it pulls the AC curve downward. The marginal product of labor curve is represented by curve B and the average product of labor curve is represented by curve A. However, it is not necessary that MC should fall throughout this stage. C the optimal capital-labor ratio remains the same. C there are diseconomies of scope. With convex isoquants, a firmʹs expansion path cannot be negatively sloped.

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BUEC CH 7 Flashcards

if marginal cost is below average variable cost

Usually, the AVC falls as the output increases from zero to normal capacity output. If the short-run average variable costs of production for a firm are rising, then this indicates that: AACSB: Analytic Bloom's: Level 1 Remember Difficulty: 2 Medium Learning Objective: 07-03 Describe the distinctions between fixed and variable costs and among total; average; and marginal costs. The marginal-cost curve lies above the average-variable-cost curve. When the marginal unit costs more than the average, the average has to increase. C I is false, and II is true. As output expands for a firm, marginal cost and average variable cost follow predictable and interrelated trajectories.

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Chapter 11 Flashcards

if marginal cost is below average variable cost

One typically thinks of marginal cost at a given quantity as the incremental cost associated with the last unit produced, but marginal cost at a given quantity can also be interpreted as the incremental cost of the next unit. As production increases, marginal revenue always increase so profits rise C. B Economies of scale and economies of scope must occur together. A SAC and LAC are both increasing for some output levels. Put another way, your average score would increase. B average total cost is positive and constant. D I and II are both false.


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If marginal cost is below average variable cost A Average total cost is

if marginal cost is below average variable cost

If marginal cost is below average variable cost: A. Which piece of information would NOT be helpful in calculating the marginal cost of the 75th unit of output? Fixed costs, on the other hand, remain constant regardless of how much or how little the company is producing. In economics, the term "shutdown point" refers to the point where the A. Therefore, both AVC and MC rise, but MC increases at a faster rate as compared to AVC. This is because average cost and marginal cost come together when average cost has done all its decreasing but hasn't started increasing yet. Wage rates mirror marginal revenue product levels exactly. By definition, then, the MC curve intersects the AVC curve at the minimum point on the AVC curve.

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When marginal cost is below average variable cost, average variable cost must be a. at its maximum. b. rising c. falling. d. at its minimum.

if marginal cost is below average variable cost

This relationship exists because the MC is mathematically equal to the wage times the inverse of the marginal product. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. A Average total costs are increasing when marginal costs are increasing. C not be defined. The firm uses two factors of production, chemicals and labor. When MC is equal to AC then the latter is constant. C SAC is decreasing but LAC is increasing for some output levels.


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The Relationship Between Average and Marginal Costs

if marginal cost is below average variable cost

The shape of the LRATC is affected by the law of diminishing returns. Returning to the context of production costs, think of average cost for a particular production quantity as the current average grade and marginal cost at that quantity as the grade on the next exam. Which of the following is true regarding the relationship between returns to scale and economies of scope? A A firm experiencing economies of scope must also experience increasing returns to scale. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. The total costs per year for the firm are: AACSB: Analytic Bloom's: Level 3 Apply Difficulty: 1 Easy Learning Objective: 07-03 Describe the distinctions between fixed and variable costs and among total; average; and marginal costs. Topic: Short-Run Production Costs 99.

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F14ECON111HWPS3ans

if marginal cost is below average variable cost

To maximize his profits in this competitive market, how many workers should he hire? A I is true, and II is false. Consider the following statements when answering this question. B the cost to the firm of using waste water before the tax was put in place. In this instance, the range of production possibilities at point d, A. Refer to the table below.

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When marginal cost is below average variable cost, average variable cost must be: A. above average total cost. B. rising. C. below average total cost. D. falling.

if marginal cost is below average variable cost

If MC is less than ATC, then ATC is increasing. In some cases, this also means that average variable cost takes on a U-shape, though this is not guaranteed since neither average variable cost nor marginal cost contains a fixed cost component. If you scored 85 on the exam, your average would not change. Fixed costs are costs that do not vary with the amount of output produced by the company and are independent of the number of goods or services produced by the business. What is the relationship between MC and AVC? The number of units produced is 10,000.

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