Causes of ATC behavior

Causes of ATC - So long as fixed and indivisible factors are not used to their fullest capacity(C1C2 the ATC keeps on falling Once the fixed

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Causes of ATC behavior: ATC passes through three stages. Initially it falls, then it reaches a minimum and is nearly constant; finally it starts increasing. The explanation of such behavior of the ATC runs is as in the case of the laws of variable returns. In the short run, internal economies such as better and efficient performance of machine and manager, better supervision and avoidance of waste, etc. are examples of internal economies. The shape of ATC also depends on the different nature of the fixed and variable inputs.
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Unformatted text preview: So long as fixed and indivisible factors are not used to their fullest capacity (C1C2) the ATC keeps on falling. Once the fixed capacity is fully utilized the ATC reaches a minimum point (C2). This is the point of optimum utilization of fixed factors . If the output continues to increase beyond this point the fixed factors get over utilized and cause ATC to rise....
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This note was uploaded on 11/26/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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