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WHY IS THE ATC CURVE U-SHAPE? Related: Marginal and Average Product C...
The short run cost curves AVC, AC and MC are U shaped because of the law of variable proportions. According to this law, in the initial sages of production, as the rm combines its Fixed and variable factors to begin with, to produce more and more of output, the productivity of the variable factors increases, and per unit costs falls. Then, they reach the stage of minimum costs at the level of optimum combination of fixed and variable factor. Thereafter, as the use of variable input increases given the fixed factor to increase the output, the productivity of variable factor fall, resulting in rise in per unit costs. This is shown in the following diagram:


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Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The slope of the Total Revenue equals ……..

Direction: Read the following passage and answer the question that follows:The slope of a total revenue curve is particularly important. It equals the change in the vertical axis (total revenu e) divided by the change in the horizontal axis (quantity) between any two points. The slope measures the rate at which total revenue increases as output increases. We can think of it as the increase in total revenue associated with a 1-unit increase in output. The increase in total revenue from a 1-unit increase in quantity is marginal revenue. Thus marginal revenue (MR) equals the slope of the total revenue curve.How much additional revenue does a radish producer gain from selling one more pound of radishes? The answer, of course, is the market price for 1 pound. Marginal revenue equals the market price. Because the market price is not affected by the output choice of a single firm, the marginal revenue the firm gains by producing one more unit is always the market price. The marginal revenue curve shows the relationship between marginal revenue and the quantity a firm produces. For a perfectly competitive firm, the marginal revenue curve is a horizontal line at the market price. If the market price of a pound of radishes is $0.40, then the marginal revenue is $0.40. Marginal revenue curves for prices of $0.20, $0.40, and $0.60. In perfect competition, a firm’s marginal revenue curve is a horizontal line at the market price.Price also equals average revenue, which is total revenue divided by quantity. To obtain average revenue (AR), we divide total revenue by quantity, Q. Because total revenue equals price (P) times quantity (Q), dividing by quantity leaves us with price.Q. The marginal revenue curve shows the relationship between ..................... and ......................

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WHY IS THE ATC CURVE U-SHAPE? Related: Marginal and Average Product Curves (With Diagram) - Commerce
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WHY IS THE ATC CURVE U-SHAPE? Related: Marginal and Average Product Curves (With Diagram) - Commerce for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about WHY IS THE ATC CURVE U-SHAPE? Related: Marginal and Average Product Curves (With Diagram) - Commerce covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for WHY IS THE ATC CURVE U-SHAPE? Related: Marginal and Average Product Curves (With Diagram) - Commerce.
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