Question 15 of 15 Sapling Learning Mop de The graph manufacturers of chainsaws.

Question

Question 15 of 15 Sapling Learning Mop de The graph manufacturers of chainsaws. Use the graph below to ansr uive efficiency) and that each firms will only stay in this market if they can compete effectively (achieve productive efficiency) firm only has one plant. shows the long run of following questions 12 Average Total Cost () 6 10 0 2700 5000 7500 10000 15000 20000 25000 0000 3000 40000 Output (in units) Mnimum At an average total cost of $8 (with nothing demanded at other prices), what would be the maximum and minimum number of manufacturing plants if demand was 600,000 units? FirmsFirm Give Up & View

Explanation / Answer

1)

Maximum number of firms = Demand/min. output when ATC is minimum = 600000/10000 = 60 firms

Minimum number of firms = Demand/max. output when ATC is minimum = 600000/30000 = 20 firms

Valid graphs:

Graph D and F are correct (MC intersects AVC and ATC curves at their minimas and ATC > AVC)

Invalid graphs:

Graph A (AVC = ATC - AFC, it should lie below ATC)

Graph E (AVC cannot intersect ATC for the same reason as above AVC <= ATC)

Graph B (AVC cannot be decreasing when ATC is rising because AFC is a decreasing curve, see the relation above)

Graph C (MC should intersect AVC and ATC curves at their minimas)

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