20-SEP-3007 - Charts 20-SEP-2007 and figures Table 6.1 page 145 Table 6.2 page 146 Table 6.3 page 148 Figure 6.3 page148 Fixed costs do not

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Unformatted text preview: Charts 20-SEP-2007 and figures: Table 6.1 page 145 Table 6.2 page 146 Table 6.3 page 148 Figure 6.3 page148. Fixed costs: do not fluctuate with the level of production, Variable costs are a function of the level of production. TC = TVC + TFC (Total cost = total variable cost + total fixed cost). Page 148 figure 6.3: o The average fixed costs are asymptotic to the axis. This means they go down as production increases. o Total fixed costs do not fluctuate with the level of production. o The Average Variable Costs have a U-shaped graph. Example: a classroom has to be composed of 25 students not 5, not 100. The point where it falls means that is the optimum number of students. 5 students per class too expensive. 100 students per class not effective learning. o Average Total costs: ATC = AFC + AVC (average total costs = average fixed costs + average variable costs). ATC will be asymptotic to AVC because it is a sum of two values. o The only way for an average to fall occurs when the marginal cost decreases. o Marginal Cost goes through the minimum AVC and ATC. o Minimum AVC corresponds with maximum AP. ...
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This note was uploaded on 04/11/2008 for the course AAEC 1005 taught by Professor Mjellerbrock during the Fall '07 term at Virginia Tech.

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