Chapter 7
The Cost of Production 105 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.
8. Assume that the marginal cost of production is greater than the average variable cost. Can you determine whether the average variable cost is increasing or decreasing Explain. Yes, the average variable cost is increasing. If marginal cost
is above average variable cost, each additional unit costs more to produce than the average of the previous units, so the average variable cost is pulled upward. This is shown in the diagram above for output levels greater than
q2
9. If the firm’s average cost curves are U-shaped, why does its average variable cost curve achieve Share with your friends: