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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Draw the marginal-cost and average-total-cost curves for a typical firm. Explain why the curves have the shapes that they do and why they intersect where they do.

To determine
An average total cost curve and the marginal cost curve.

Explanation

Figure 1 show the marginal cost curve and average total cost.

In Figure 1, the vertical axis measures the cost and the horizontal axis represents the quantity of output. There are three features of these two curves. Firstly, the marginal cost is U-shaped but increases as output increases. Secondly, the average total cost curve is U-shaped and if the marginal cost curve is less than the average total cost, then it leads to a decrease in the average total cost...

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