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When the marginal cost is below the average total costs or the average variable costs,then the AC would be declining.When marginal cost is above the average cost then the average cost would be increasing.Therefore the marginal cost should intersect with the average cost at the lowest point in order to pull the average cost upwards.

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βˆ™ 2007-11-05 14:36:52
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Q: Does marginal cost curve always intersect the average cost curve at the average cost curve's lowest point?
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Why are the marginal cost average variable cost and average total cost curves U shaped?

Because of economies of scale and diseconomies to scale.


What are typical shapes of marginal-benefit curves?

Marginal Benefit curve is usually downward sloping, while Marginal Cost is usually upward sloping.


What is the equilibrium price?

It is the price where the intentions of buyers and sellers match. where the supply and demand curves intersect


Q3 Explain briefly the technique of marginal costing In what ways do you consider this?

The marginal cost of an additional unit of output is the cost of the additional inputs needed to produce that output. More formally, the marginal cost is the derivative of total production costs with respect to the level of output. Marginal cost and average cost can differ greatly. For example, suppose it costs $1000 to produce 100 units and $1020 to produce 101 units. The average cost per unit is $10, but the marginal cost of the 101st unit is $20 The Econ Model applications Perfect Competition and Monopoly emphasize the roles of average cost and marginal cost curves. The short movie Derive a Supply Curve (40 seconds) shows an excerpt from the Perfect Competition presentation that derives a supply curve from profit maximizing behavior and a marginal cost curve.


What is the relationship between marginal cost average total cost and average variable cost?

In the short run (which is what this question is about), as output increases, the average total cost decreases where the marginal cost is below it.First you have to realise that increasing and decreasing output will affect average fixed costs and average variable costs.Consider the following (explanation to these specific points is at the bottom of the page):Average fixed costs (AFC) decrease as output increases. A fall in average fixed costs leads to a fall in marginal costs.Let's call the decrease in AFC, and therefore a decrease in marginal costs, "X"Average variable costs (AVC) increase as output increases. It's the one most associated with marginal cost.A rise in average variable costs leads to a rise in marginal costs.Let's call the increase in AVC, and therefore an increase in marginal costs, "Y"It is possible to deduce that:When X is greater than Y, the decrease is greater than the increase in marginal costs. Because it's going down more than it's going up, marginal cost is going to get pulled down and fall.When X is less than Y, the decrease is smaller than the increase in marginal costs. Because it's going up more than it's going down, marginal cost is going to get pulled up and rise.You've just read about how marginal costs go up and down, according to the average variable & fixed costs. Now to pull in average total costs, as if it wasn't annoying enough.The average total cost (ATC) of the firm is found by: Average fixed costs + average variable costsAverage total cost essentially changes depending on marginal costs (MC).If marginal cost is below average total cost, the average is going to get pulled down.It's important to remember that MC can rise even if it's below the average... but eventually it will rise above it.If marginal cost is above average total cost, the average is going to get pulled up.Marginal cost always equals the average total cost when the average is at its lowest.This is when the two curves cross over each other, and is linked to the law of diminishing marginal returns.So, the change from a decreasing ATC to an increasing one is caused by a rising MC.Because AVC is the thing that really pulls MC up significantly, leading to the change, it is the most important factor when considering these types of costs... because AFC eventually flatterns out and doesn't really make a difference as output is increased more and more.Why does average fixed cost & average variable cost change?If output is increased, since fixed costs in the short run stay the same, average fixed costs will be lowered (average fixed costs = fixed cost divided by quantity of output). The cost is being spread out over the quantity.If output is increased, average variable costs necessarily increase, because variable costs are things like raw materials that you really need for production. If production output is at 0, then the average variable cost will be 0 too!

Related questions

Is sustainable long-run equilibrium always reached when the AD and SAS curves intersect?

no


Why are the marginal cost average variable cost and average total cost curves U shaped?

Because of economies of scale and diseconomies to scale.


Identify the characteristics of a perfectly competitive market and explain how the marginal revenue marginal cost average revenue average variable cost average total cost and price curves all interact?

Characteristics of Perfectly Competitive Market: Free entry / exit (no barriers to entry) Firms produce homogenous products There is perfect knowledge of the market Many Seller and Buyers Seller is a passive price taker Marginal Revenue Curve = Average Revenue = Price = Demand Curve for individual firm. The curve is constant Marginal Cost Curve intersects both Average Variable Cost and Average Total Cost curves at their minimum point Profit Maximisation output level is when MR = MC (find intersect point and draw line down to Q axis)


Relationship between marginal cost and average total cost?

The cost curves best tells us the relationship between the marginal cost and average total cost. The average fixed cost (AFC) curve will decline as additional units are produced, and continue to decline.


What are typical shapes of marginal-benefit curves?

Marginal Benefit curve is usually downward sloping, while Marginal Cost is usually upward sloping.


What is point located at the supply and demand curves intersect?

The equilibrium price.


What is located at the point where the supply and demand curves intersect?

The equilibrium price.


What figures intersect but are not perpendicular?

Any lines or curves that are mutually skew.Any lines or curves that are mutually skew.Any lines or curves that are mutually skew.Any lines or curves that are mutually skew.


What is the relationship between marginal cost and average cost curves?

Margianal cost curve crosses the average total cost curve at the lowest point on the average total cost curve to be socially and ecomonical efficient.


Why do the demand and marginal revenue curves coincide?

Because in Pure Competition, Demand equals Price, and Price equals Marginal Revenue;hence, Demand equals Marginal revenue.


What are some things that intersect?

Lines, curves, planes, solid shapes are some.


What are characteristics of an indifference curve?

indifferent curves are convex to their origin, they do not intersect, and have a negative slope

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