1.) The average total cost (ATC) curve for a perfectly competitive firm is most
ID: 1226435 • Letter: 1
Question
1.) The average total cost (ATC) curve for a perfectly competitive firm is most often U-shaped because of the effect of ___________ at lower quantities and __________ at higher quantities. (Note: In the answer options, AVC = average variable cost and AFC = average fixed cost.)
A. falling AVC; rising AFC
B. rising AFC; falling AVC
C. falling AFC; rising AVC
D. rising AVC; falling AFC
2.)For a single profit-maximizing, perfectly competitive firm the MC (marginal cost) curve and the ATC (average total cost) curve intersect
3.)For a profit-max, perfectly competitive firm, price will be _______ average revenue.
A. at the MC curve's minimum pointExplanation / Answer
1)
C. falling AFC; rising AVC
as we know that fixed costs are constant, so as we increase production, AFC declines and takes the costs lower, but with the increase in production, after some point of time, AVC costs will start increase due to dimishing marginal productivity and higher costs allocated for additional units.
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