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Unformatted text preview: g) MC passes through minimum of AVC and AC. Reasoning: if AVC are rising, then MC must be above AVC, and if AVC are decreasing, MC must be below AVC. h) GRAPHS i) j) k) 21.3) Marginal Costs and Variable Costs a) Area under marginal cost curves gives the variable costs. b) Graph: c) 21.4) Long-run Costs a) In the long run, there are no fixed costs so the AC curve doesnt have to be U-shaped. b) Short run AC curve must be tangent to long run AC cost: c) d) e) f) g) Lower envelope : See picture below h) i) j) 21.5) Discrete Levels of Plant Size a) Each different level of output has a unique optimal plant size associated with it. b) You can construct long run AC curve by taking the lower boundaries of the short run AC curve: c) d) 21.6) Long Run Marginal Costs a) Long run marginal costs consists of various segments of the short run marginal cost curves. b) Graph: c) d) e)...
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- Fall '06