Econ111 Queries (1 Viewer)

[Nessie96]

Heys, I don't really know how to approach/ form a response for this question. Also, is a graph necessary?



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[BillTheConk]

Hi Nessie,

Probably a bit late, but anyway . . . the variable cost and fixed cost are different animals. One doesn't affect the other, so the AFC curve has no effect on the variable cost curve. They are combined to show the total cost curve, so a difference in fixed costs will have an effect on the average total cost curve.

To show this in a diagram, a graph with an AFC curve plus an AVC curve can be shown, with an ATC curve which is a "total" of the two other curves, i.e. each y-axis co-ord on the ATC is the sum of the y-axis numbers of the two others. Then draw another one similar, but with a different ATC curve, say "higher" up. The ATC curve for this diagram will be the same amount higher up the y-axis as the new AFC is higher than the first one.

 

[Nessie96]

Hi Nessie,

Probably a bit late, but anyway . . . the variable cost and fixed cost are different animals. One doesn't affect the other, so the AFC curve has no effect on the variable cost curve. They are combined to show the total cost curve, so a difference in fixed costs will have an effect on the average total cost curve.

To show this in a diagram, a graph with an AFC curve plus an AVC curve can be shown, with an ATC curve which is a "total" of the two other curves, i.e. each y-axis co-ord on the ATC is the sum of the y-axis numbers of the two others. Then draw another one similar, but with a different ATC curve, say "higher" up. The ATC curve for this diagram will be the same amount higher up the y-axis as the new AFC is higher than the first one.

Thanks!

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