Use the general relationship between marginal and average values to explain why a marginal cost curve must intersect an average total cost curve and an average variable cost curve at their minimum points
What will be an ideal response?
The relationship between marginal and average values can be stated as follows: if the marginal value is below the average value for a variable, it pulls the average value down and if the marginal value is above the average value, it pulls the average value up. Applying this to cost curves, if average total cost is falling, marginal cost must lie below average total cost. If average total cost is rising, marginal cost must lie above average total cost. Therefore, the marginal cost curve must intersect the average total cost curve at its minimum point. The same principle applies to the average variable cost curve.
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Answer the following statement true (T) or false (F)
Firms under-invest in safety because
A) firms are not concerned with safety. B) firms do not want their plants to be safe. C) firms are risk averse. D) firms do not enjoy all of the benefits from investments in safety.
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b. the average variable cost is decreasing and the average total cost is increasing. c. both the average variable and average total cost are decreasing. d. the average variable cost is decreasing and the average total cost may be increasing or decreasing.
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a. be disappointed in the degree of economic understanding possessed by the author of the report b. be excited about the earning potential of new entrants into the labor market c. be anxious about inflationary indicators d. anticipate a recession e. encourage a tax cut to stimulate the economy