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The relationship between Marginal Cost and Average Total Cost maybe a bit tricky. Let me take
on this with the following example.
What is our average weight in this class? I will exclude myself because I am rather heavy:0) I
assume the average weight of the students in this class 150 pounds. This average weight is
analogous to average total cost (ATC). Both averages are found by dividing the respective totals
(total weight or total cost) by the number of units (students or quantity).
Suppose that Kentucky Derby jockey winner will join us in the threads:0) What is his weight? I
vaguely recall him weighing only 90 pounds, please correct me if I am wrong:0) What happens
to the average weight of the class? Because his marginal weight of 90 pounds is less than the
150pound average weight, the average weight falls, right? (To check this multiply 150 lbs by the
number of students in the class, add 90 lbs and divide the result by the number of students plus
one to get the new average).
This relation can be applied to the marginal cost and average total cost. When marginal cost is
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This note was uploaded on 03/26/2012 for the course ECON GM545 taught by Professor Gotches during the Summer '11 term at Keller Graduate School of Management.
 Summer '11
 gotches
 Economics

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