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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....+
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∙ 11y ago
The law of variable proportion states that as one input is increased while keeping other inputs constant, the output will eventually decrease. This can lead to changes in the cost curve by affecting the cost of production as more or less of a variable input is used, impacting both marginal and average cost.
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Relationship between fixed cost average cost and marginal cost with graph?
Fixed costs do not change with production level, so they are represented by a horizontal line on a graph. Average cost decreases as production increases due to spreading fixed costs over more units, then increases as marginal cost (the cost of producing one more unit) exceeds average cost. Marginal cost intersects average cost at its minimum point, where average cost is at its lowest.
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 cost refers to the total expense incurred in completing a specific task or project, including direct labor, materials, and overhead costs. Tracking job costs helps businesses analyze profitability and make informed decisions about pricing, resource allocation, and process improvements.
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.
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.
What is the relationship between total cost curve and variable cost curve?
estimated cost
A variable cost changes in proportion to changes in the volume in activity?
the answer is Variable Cost
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.
A firm's marginal cost curve above the average variable cost curve is also?
A firm's short run supply curve
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.
Why does the average variable cost curve initially slope downward?
The average variable cost curve compares the company's maximum performance to its present state. For example if the minimum profits are to the left of the AC it means the company will decrease profits by increasing their production. Therefore creating a curve.
