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Then its variable cost function is Q 3 –5Q 2 +60Q, and its average variable cost function is (Q 3 –5Q 2 +60Q)/Q= Q 2 –5Q + 60. The slope of the average variable cost curve is the derivative of the latter, namely 2Q – 5. Equating this to zero to find the minimum gives Q = 2.5, at which level of output average variable cost is 53.75.
The general price level is a hypothetical measure of overall prices for some set of goods and services (the consumer basket), in an economy or monetary union during a given interval (generally one day), normalized relative to some base set. Typically, the general price level is approximated with a daily price index, normally the Daily CPI.
If the firm knows average total cost and average variable cost, it is possible to find the same result as Example 1. Because average total cost is average variable cost plus average fixed cost, average fixed cost is average total cost minus average variable cost. [2] If producing 5 shirts generates an average total cost of 11 dollars and ...
Economists tend to analyse three costs in the short-run: average fixed costs, average variable costs, and average total costs, with respect to marginal costs. The average fixed cost curve is a decreasing function because the level of fixed costs remains constant as the output produced increases.
In microeconomics, a monopoly price is set by a monopoly. [1] [2] A monopoly occurs when a firm lacks any viable competition and is the sole producer of the industry's product. [1] [2] Because a monopoly faces no competition, it has absolute market power and can set a price above the firm's marginal cost. [1] [2]
At a level of Q at which the MC curve is above the average total cost or average variable cost curve, the latter curve is rising. [10]: 212 If MC is below average total cost or average variable cost, then the latter curve is falling. If MC equals average total cost, then average total cost is at its minimum value. If MC equals average variable ...
If for years 1 and 2 (possibly a span of 20 years apart), the nominal wage and price level P of goods are respectively nominal wage rate: $10 in year 1 and $16 in year 2 price level: 1.00 in year 1 and 1.333 in year 2, then real wages using year 1 as the base year are respectively: $10 (= $10/1.00) in year 1 and $12 (= $16/1.333) in year 2.
The marginal cost can also be calculated by finding the derivative of total cost or variable cost. Either of these derivatives work because the total cost includes variable cost and fixed cost, but fixed cost is a constant with a derivative of 0. The total cost of producing a specific level of output is the cost of all the factors of production.