GLS_7_9

eFigure

Isoquants

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You must read each slide, and complete any questions on the slide, in sequence.

Question 1 of 3

Question 1.

Why is the firm's short-run marginal cost curve below the firm's short-run average total cost curve when ATC_SR is falling and above the firm's short-run average total cost curve when ATC_SR is rising?

When the cost of an additional unit of production is less than the average, the average cost is falling, being pulled down by the cost of the marginal unit of production and when the cost of an additional unit of production is greater than the average, the average cost of production rises with additional production.

When the cost of an additional unit of production is less than the average, the average cost is rising, being up by the cost of the marginal unit of production and when the cost of an additional unit of production is greater than the average, the average cost of production falls with additional production.

None of the above.

When the cost of an additional unit of production is more than the average, the average cost is falling, being pulled down by the cost of the marginal unit of production and when the cost of an additional unit of production is less than the average, the average cost of production rises with additional production.

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Correct! The firm’s marginal cost curve will be below the firm’s average total cost curve as long as the marginal cost is less than the average. In this range, the cost of the additional unit is less than the average, bringing the average down. The firm’s marginal cost curve will be above the firm’s average total cost curve when the marginal cost of production is greater than the average. In this range, the cost of the additional unit exceeds the average per unit cost and the average will rise.

Incorrect. The firm’s marginal cost curve will be below the firm’s average total cost curve as long as the marginal cost is less than the average. In this range, the cost of the additional unit is less than the average, bringing the average down. The firm’s marginal cost curve will be above the firm’s average total cost curve when the marginal cost of production is greater than the average. In this range, the cost of the additional unit exceeds the average per unit cost and the average will rise.

Chapter 1. eFigure 7.9

Question 1.

Question 2.

Question 3.