Hi guys, help me only if you are sure about the answers Examine whether each of

Question

Hi guys, help me only if you are sure about the answers Examine whether each of the following statements is true or false Explain. If MC is lew than ATC then AVC falls as output rises. If MC exceeds AVC then ATC rises as output rises. [Notation/Abbreviations : MC = marginal cost; AVC = average variable cost. ATC = average total coat] Suppose you are a consultant for a firm that is perfectly competitive, The firm is worried only about its policies in the short run, what would you recommend in terms of quantity changes (raise, cut, shut down or stay put) and pnee changes (raise, cut, stay put) in each of the following situations: P = S27 MC = SI2 AVC = $33. P = S99 MC = S54 AVC = $63.

Explanation / Answer

b) True. But when MC crosses AVC at its minimum , MC rises faster and become more than AVC and ATC.

.2. a) Price is more than MC but less than AVC, firm should shut down because he is not able to recover his both fixed as well as variable cost

b) Price is greater than both MC and AVC, he should continue production becasue he is recovering his variable costs. MC is less than AVC that means firm has not achieved cost minimization, He should increase prodcution to get benefits of economies of scale.

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