ECON 101 2Midtermreview

Efficient use of resources resources are used

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Unformatted text preview: Cost Curve Is U- Shaped The AVC curve is U- shaped because: Initially, marginal product exceeds average product, which brings rising average product and falling AVC. Eventually, marginal product falls below average product, which brings falling average product and rising AVC. The ATC curve is U- shaped for the same reasons. In addition, ATC falls at low output levels because AFC is falling steeply. Cost Curves and Product Curves The shapes of a firm’s cost curves are determined by the technology it uses: MC is at its minimum at the same output level at which marginal product is at its maximum. When marginal product is rising, marginal cost is falling. AVC is at its minimum at the same output level at which average product is at its maximum. When average product is rising, average variable cost is falling. Shifts in Cost Curves The position of a firm’s cost curves depend...
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