Consider the various short-run cost curves. (a) why is the total variable cost c
ID: 1242298 • Letter: C
Question
Consider the various short-run cost curves. (a) why is the total variable cost curve TVC shaped the way itis? In explaining, go back to the most basic assumptions about whathappens when a firm produces output in the short run. (b) When marginal cost MC is at its minimum value, what can wesay about the nature of the marginal product of labor (MPL) curve(I.E., is it upward sloping or downward-sloping)? What is thelogical basis for your conclusion? (c) When average variable cost AVC is at its minimum value,what can we say about the nature of the marginal produc of labor(MPL) curve (I.E., is it upward sloping or downward-sloping)? Whatis the logical basis for your conclusion? (d) Suppose that, for a particulra type of firm, the MPL isnot diminishing, but it's also not increasing. What does the MCcurve for this firm look like? Why might it make sense to think ofthe firm's capital being, say, a computer network, that multipleworkers can use at the same time without slowing down thenetwork? Consider the various short-run cost curves. (a) why is the total variable cost curve TVC shaped the way itis? In explaining, go back to the most basic assumptions about whathappens when a firm produces output in the short run. (b) When marginal cost MC is at its minimum value, what can wesay about the nature of the marginal product of labor (MPL) curve(I.E., is it upward sloping or downward-sloping)? What is thelogical basis for your conclusion? (c) When average variable cost AVC is at its minimum value,what can we say about the nature of the marginal produc of labor(MPL) curve (I.E., is it upward sloping or downward-sloping)? Whatis the logical basis for your conclusion? (d) Suppose that, for a particulra type of firm, the MPL isnot diminishing, but it's also not increasing. What does the MCcurve for this firm look like? Why might it make sense to think ofthe firm's capital being, say, a computer network, that multipleworkers can use at the same time without slowing down thenetwork?Explanation / Answer
(a) When producing little of products, the marginal cost is veryhigh. So, the curve of TVC in the beginning is steep curve withupward sloping. After a certain amount of production, the marginalcost started to reduce, the TVC curve become smooth curve,increasing gradually. After the marginal cost over the minimumvalue, marginal cost started to rise by increasing its output.Then, the TVC curve gradually steep again. In the short run, firm may decide to produce more, it marginal costwill increase. This lead to increase in the TVC in short run. (b)MPL curve is upward sloping and getting smooth. When the MPLcurve is upward sloping, it means for every additional labor, theincrease in production output is more than the previous additionalworker. So, for every additional labor, the marginal cost isdecreasing, since for every new worker, it produce more output andthis will pull down the cost. (c)MPL curve also upward sloping. Same as previous question, moreworker, more increase in production. This can pull down the averagecost. When MPL curve started diminishing, the avarage variable costwill started to increase back. (d)MC curve will be horizontal line. Since the MPL curve is notdiminishing and increasing, it means that the additional cost forevery output is the same. This think is based on the work of themultiple workers aren't intercept with each other. The speed of thedata transferred wont be effected by other people.