Asked by Aiden Kravitz on May 04, 2024
Verified
Refer to Table 13-9. For the firm whose production function and costs are specified in the table, its average-total-cost curve is
A) constant.
B) decreasing.
C) increasing.
D) U-shaped.
Average-Total-Cost Curve
A graphical representation showing the average cost per unit of output at different levels of production, typically U-shaped due to economies and diseconomies of scale.
Production Function
A mathematical model that describes the relationship between input factors and the output of goods or services.
Costs
The expenses involved in producing or acquiring goods and services, including labor, materials, and overheads.
- Determine the average total cost, average fixed cost, and average variable cost using the specified data.
- Dissect and clarify the range of cost curve shapes in the context of evaluating production and associated expenses.
Verified Answer
AK
Alexandre KravitzMay 09, 2024
Final Answer :
D
Explanation :
The average total cost (ATC) is calculated by adding the fixed cost and variable cost and then dividing by the output. As the number of workers increases, initially, the ATC decreases because the output increases at a faster rate than costs. However, after a certain point, the output increases at a decreasing rate, leading to an increase in ATC. This creates a U-shaped ATC curve, where ATC decreases initially due to economies of scale and then increases due to diseconomies of scale.
Learning Objectives
- Determine the average total cost, average fixed cost, and average variable cost using the specified data.
- Dissect and clarify the range of cost curve shapes in the context of evaluating production and associated expenses.