Jim Whitney Economics 102

  Marginal and average value geometry exercise

    You can examine any total value function to find the marginal and average values related  to it.
    The example here shows a total cost (TC) function for a firm. When we examine it, we can see how the firm's marginal cost (MC) and average total cost (ATC) behave.
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1. Consider the three points a, b and c in the diagram, and use the notation >,<,=,? to compare values for each of the following:
1. MCa ___ MCb 4. ATCa ___ ATCb 7. MCa ___ ATCa
2. MCb ___ MCc 5. ATCb ___ ATCc 8. MCb ___ ATCb
3. MCa ___ MCc 6. ATCa ___ ATCc 9. MCc ___ ATCc
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2a. Indicate approximately where in the diagram MC reverses its behavior.
2b. Does MC (1) fall and then rise as Q rises, or (2) rise and then fall as Q rises? ____
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3a. Indicate approximately where in the diagram ATC reverses its behavior.
3b. Does ATC (1) fall and then rise as Q rises, or (2) rise and then fall as Q rises? ____