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As we know law of variable proportion means as we increase the quantity of one input keeping other input fix... the Total physical product increase @ increasing rate than increase at decreasing rate than at decreasing rate.... and cost curve is totally dependent upon total variable cost curve.... so if the output is increasing this is due to increase in variable factors( labors) and if labors increase the cost will be obviously more as the labor increase....+
What else can I help you with?
Relationship between fixed cost average cost and marginal cost with graph?
Your fixed cost is going to be lower than you average cost and marginal cost as it is what you have to pay no matter what. If your business has a fixed cost of $800 (renting the building, insurance, and other things that don't change month to month) per month you and utilities, pay roll, and inventory to that (all things that change month to month) and average the amount out over, lets just say, a year this will allow you to subtract the average cost from the fixed cost to get the average marginal cost. You can deduce that the marginal cost month by month is the total minus the fixed. Draw your own graph. Another way of putting it.. Average Cost curve has a U shape and the Marginal Cost curve intersects the Average Cost curve at its minimum. Average Cost has U shape because when a firm starts producing initially, it experiences increasing returns - as the Fixed Costs are being spread over more levels of output and the combination of input factors reach optimum. This is where AC curve is falling. Then once the Short-run capacity constraints of the Fixed Inputs is reached, the firm begins to experience diminishing marginal returns to its variable inputs. In other words, the principle of diminishing returns is becoming more dominant. This is where AC curve is increasing. When MC is below AC, AC is falling because producing an extra output will pull down average costs. When MC is above AC, AC is rising, because producing an extra output will increase AC. Therefore MC always intercepts a U shaped AC curve at its minimum point.
Compare between the short run and long run costs using all categories of coststotal costtotal average costfixed costvariable costaverage fixed costaverage variable cost?
In the short run, all costs are considered variable except for fixed costs, which remain constant. Total cost in the short run can fluctuate due to changes in variable costs, affecting average total cost. In the long run, all costs become variable, allowing for more flexibility in adjusting production levels to optimize efficiency and minimize costs. Fixed costs become average fixed cost and average variable cost in the long run as they spread over more units of production.
Define high low method?
The high-low method is a technique used to separate fixed and variable costs within a mixed cost. By comparing the highest and lowest activity levels and the corresponding total costs, this method allows you to estimate the fixed and variable components of a cost.
What is job cost?
Job Costing is the art of breaking down the specific cost of a product or service that you provide. Fixed and variable cost play the most important role in this assessment. Fixed cost are overhead or cost that won't vary such as light bill, insurance, mortgage or rent, etc. Variable cost are fuel, oil, lumber, steel, etc. The change in these cost to make a certain product and the cost of the job will change dramatically. job costing also mean production against the customer order. Total cost recorded and reported the order of job. Unit cost is also reported and recorded the order of job.
What does the law of increasing cost explain?
The law of increasing cost explains that as production increases, the opportunity cost of producing additional units of a good also increases. This is because resources are not equally efficient in producing all goods, and as more of one good is produced, resources are shifted from their most efficient use to less efficient uses.
At what point does the marginal cost (MC) curve intersect the average variable cost (AVC) curve?
The marginal cost (MC) curve intersects the average variable cost (AVC) curve at the minimum point of the AVC curve.
Why is average cost and average variable cost are both you shaped?
the average variable cost curve and average cost curve are u- shaped because of the law of variable proportions.
A variable cost changes in proportion to changes in the volume in activity?
the answer is Variable Cost
What is the relationship between total cost curve and variable cost curve?
estimated cost
A firm's marginal cost curve above the average variable cost curve is also?
A firm's short run supply curve
Why is the Marginal cost curve downward sloping?
Marginal cost curve is u-shaped curve, this is due to law of variable proportion(return to factors), firstly, there is an increasing return (i.e, decreasing cost) then there is a stage of constant returns (i.e, constant cost) then lastly comes the stage of decreasing returns (i.e increasing cost), that`s why marginal cost curve first slopes downward and then slope upward and become u-shaped.
Total variable cost does not increase in proportion to output is it true?
False, it is the fixed cost which is not increased or decreased with proportion to output.
How is a perfectly competitive firms marginal cost curve related to its supply curve?
a perfectly competitive firms supply curve will be the portion of the marginal cost curve which lies above the average variable cost curve (AVC)..this will be due to the firms unwillingness to supply below the price in which they could cover their variable costs
What is a firm's short run supply curve?
A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.
Is the area under the marginal cost curve equal to the total variable cost?
yes
Relationship between marginal cost and the supply curve for a purely competitive firm?
Marginal cost curve above the average variable cost curve, is the same as the short run supply curve. In perfect competition, MC=Price. It follows that production will be at that point. Hence the supply curve is the same as that part of the MC curve which is above AVC, where the firm can cover its variable cost....this is better than shutting down.
What will a monopolist firm do if it's demand curve lies below its average variable cost curve?
It will shut down.
