Chapter 5: Average Costs Flashcards
1
Q
AFC
A
FC/Q
2
Q
AVC
A
VC(Q)/Q
3
Q
ATC
A
C(Q)/Q
4
Q
Marginal Cost
A
the cost of producing an additional unit of output
5
Q
MC formula
A
change in Quantity
6
Q
If marginal cost is below an average cost curve
A
average cost is declining
7
Q
If marginal cost is above an average cost curve
A
average cost is rising
8
Q
ATC=
A
AVC +AFC
9
Q
When is the only time LRAC touches another point on the curve
A
when the short-run curve optimally uses fixed factors
10
Q
What happens as output is expanded?
A
as more output is produced the fixed costs are allocated over a greater quantity
11
Q
Discuss the relationship between marginal cost and marginal product
A
its inverse
12
Q
Why ATC and AVC get closer and closer?
A
the only difference between the two is AFC and as it gets lower they get closer
13
Q
What must the MC curve do?
Draw these curves?
A
……..
