2. Using Figure 2 below, showing Average Total Cost (ATC), explain the maximum number ofunits that will be produced by a price taker and a price searcher firm. What causes ATC tochange as # Units Produced changes?Cost per Unit$60$50$30Figure 2 - Average Total Costs500 800 950 1100# Units ProducedMarket Price (MR)

Answered: 2. Using Figure 2 below, showing…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 9PA

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2. Using Figure 2 below, showing Average Total Cost (ATC), explain the maximum number of
units that will be produced by a price taker and a price searcher firm. What causes ATC to
change as # Units Produced changes?
Cost per Unit
$60
$50
$30
Figure 2 - Average Total Costs
500 800 950 1100
# Units Produced
Market Price (MR)

Expert Solution

Step 1

Average total costs:

Economic costs involve not just the accounting costs but also the opportunity cost of making one particular output.

The average total cost signifies the total cost incurred per unit of output produced. It consists of an average fixed cost that remains unchanged over any unit production and an average variable cost that changes with the production amount.

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