Average vs. Marginal Cost for Beautiful Cars' Linear Cost Function

Deriving the Slope of the Average Cost Curve

U-Shaped Average Cost Curve

A company is producing 500 units of a product. At this output level, the cost of producing the 501st unit is $12, while the average cost for each of the 500 units is$18. Based on this information, which course of action should the company take if its goal is to lower its average cost per unit, and why?

For a firm producing a positive quantity of output, match each relationship between marginal cost (MC) and average cost (AC) to the corresponding behavior of the average cost curve.

Evaluating a Production Decision

Production Strategy for a Coffee Roaster

If a firm observes that the cost of producing one more unit of its product is less than the current average cost per unit, it can be concluded that producing this additional unit will cause the average cost to rise.

Interpreting Cost Data

Explaining the MC-AC Relationship with an Analogy

A firm's total cost (TC) of production for different quantities (Q) is shown in the table below.

Based on this data, how does the firm's average cost change when production increases from 11 to 12 units, and why?

A business consultant analyzes a company's production data and makes the following statement: 'At your current output of 1,000 units, your average cost per unit is $50, which is the lowest possible average cost for your firm. My analysis also shows that the cost to produce the 1,001st unit would be$45.' Based on the principles relating the cost of an additional unit to the average cost, is the consultant's statement logically sound?

Consider a firm with a U-shaped average cost (AC) curve. At an output level of Q1, the firm is operating on the portion of the AC curve where costs per unit are decreasing as more units are produced. Which of the following statements accurately describes the relationship between marginal cost (MC) and average cost (AC) at this output level Q1?