Microeconomics 28 Wednesday, November 8, 2006

Microeconomics 28 Wednesday, November 8, 2006 - $ 1. MC...

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Wednesday, November 08, 2006 Microeconomics TC = VC + FC AFC = FC/Q AVC = VC/Q ATC = TC/Q = FC/Q + VC/Q = AFC + AVC MC = ∆TC/∆Q = SLOPE AFC declines as output increase $ AVC is U-shaped because adding workers to a small work force makes workers more productive on average and adding workers ATC to a large workforce makes workers less AVC productive on average Follows from production that exhibits diminishing marginal product ATC is U-shaped because it reflects AFC AVC and AFC Q MC CURVE
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Unformatted text preview: $ 1. MC Curve is downward sloping initially, MC but eventually slopes upward because of diminishing returns. AFC ATC 2. MC curve intersects the ATC and the AVC AVC curve at their minimum point (think about marginal and average grades) 3. The minimum point of MC curve corresponds to the point of inflection (point of diminishing returns) on the TPL curve and the maximum Q of the curve. $ Q TPL Q Q1 Q1 Wednesday, November 08, 2006 MPL Q1 Q L1 L L1 L...
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Microeconomics 28 Wednesday, November 8, 2006 - $ 1. MC...

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