Answer this Quick MICROECONOMICS Question

[CuriousAndy]

What is the general relationship between Average Total Cost (ATC) and Marginal Cost (MC)?

hints:

*ATC drops rapidly as output increaes but its dropping ratio is decreased exponentially on each drop
*Marginal cost decreases and then increases again forming a U shape in graphs

Do I just give a visual answer like the hints above or is there some conceptual relationship between ATC and MC?

~andy (NEEDS TO SLEEP)

 

[CuriousAndy]

#)$%()$%&Q(#$%
:disgust::disgust::disgust::disgust::disgust::disgust:

:|:frown:

~andy <---really stressed out, needs sleep, alskjfdlkjfdkgj

 

[Mo0o]

ap microeconomics? my friends take macro and he says the Sh!ts starting to hit the fan about now

 

[BrunoPuntzJones]

atc is just total costs divided by the number of units (duh). marginal cost is just the cost to produce the next unit. completely unrelated things. best example i can think of was this boiler example i saw. lets say you have some boilers you can make.
cost for

1 50000
2 48000
3 47000
4 44000
5 43000
6 56000
7 58000

at point 5 plant capacity is reached or something. marginal cost from 1-2 is 48000, from 2-3 is 47000, you get the idea, at some point however costs go back up as capacity (among other things) is reached and you must purchase more space/machinery whatever. from 1-5 you average total costs drop (for 4 units it's 47,x and for 5 units it's 46,x). once you hit unit 6 though your average total cost is going to go up as the price per next unit (marginal cost) rises. not the best example, im tired and know i didnt explain it well i understand it anyway

 

[CuriousAndy]

Um, i already totally understand what ATC and MC are.

I just can't seem to relate the two and describe the relationship. And yes, you said it too. Both of them seem irrelvant to EACH OTHER

That's the Q I'm asking

~andy

 

[Yo Ma Ma]

Try plugging a few key words into google, that seemed to work very well for someone the other night.

 

[BrunoPuntzJones]

as far as i can remember, they are completely unrelated except for that as marginal costs begin to increase when capacity is reached, and therefore ATC increase. lemme see if i can find a book that talks about it.

 

[virusag13]

My teachers online notes for micro economics: http://ucsu.colorado.edu/~bhatiaa/micro.html

Look under "cost of production"

 

[axelfox]

As MC increases, the ATC increases. As the cost of producing the next one goes up, the average price of producing just one also goes up.

Say the ATC to make a bike is $50 (some 40, some 60). If you next one costs $75 to make (MC), the AVERAGE of all the bikes produced goes up ((50+75)/2))

I could be wrong though

 

[BrunoPuntzJones]

ok this book says almost exactly what i said (it's what i was thinking of so that would make sense ) that they (from what i understand) are unrelated. the boiler example shows where avg costs decrease but marginal goes up. going by avg cost you should accept the job. but it says that you should not use avg cost as marginal cost is increasing and should be the deciding factor. if you want icq me and i can scan the book and send them to you. dont really have a way to host them right now.

 

[BrunoPuntzJones]

<< As MC increases, the ATC increases. As the cost of producing the next one goes up, the average price of producing just one also goes up.

Say the ATC to make a bike is $50 (some 40, some 60). If you next one costs $75 to make (MC), the AVERAGE of all the bikes produced goes up ((50+75)/2))

I could be wrong though >>

correct. same as when mc goes down (dont confuse marginal cost with variable cost though, they arent the same). same as the boiler example but i didnt put in avg costs

 

[CuriousAndy]

got the answer.

Whenever marginal cost is less than average total cost, average total cost is falling.
Whenever marginal cost is greater than average total cost, average total cost is rising.
the marginal-cost curve crosses the average-total-cost curve at the efficient scale. [b/]

thx

 

[BrunoPuntzJones]

<< the marginal-cost curve crosses the average-total-cost curve at the efficient scale >>

wow i was even going to scan you a page that has a graph of that!

 

[PsychoAndy]

"Microecomomics: study of individual behavior, aka: the study of the money you dont have"
"Macroeconomics: study of how an economy behaves as a whole, aka: the study of the money the government is out of"

- P.J. O'Rourke

 

[yobarman]

im taking a macroeconomics course...im learning so much it's insane. my teacher is a freaking genious. gonna be sad when the quarter is over.

 

[CuriousAndy]

my micro econimic professor is a freakn idiotic oddball.

his expression never changes, talking in this never-changing monotone. He kind of dazes as he speaks to the class. I cannot even understand what the hell he's saying cuz of his thick accent.

He looks socially inept. I wonder if he ever laughed or got angry in his life