answersLogoWhite

0


Best Answer

When average variable costs equal to the average marginal cost, the average variable cost will be at the minimum point. i.e. lowest cost

User Avatar

Wiki User

โˆ™ 2011-03-05 03:11:32
This answer is:
User Avatar
Study guides

Economics

20 cards

How long does it take for a check to clear

Are chemicals safe

How could the federal reserve encourage banks to lend out more of their reserves

What is M2 today

โžก๏ธ
See all cards
4.18
โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…
127 Reviews

Add your answer:

Earn +20 pts
Q: What is happening to average variable costs when they equal marginal costs?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Continue Learning about Economics

What is happening to average total costs when they equal marginal cost?

That is were u now got your total cost


What is the difference between average total costs and average variable costs?

Average total cost is the average of all your costs. This is your Fixed Costs and your Variable costs. Average Variable Cost is the average of your costs that can fluctuate.


When marginal costs are below average cost at a given output one can deduce that if output increases what happens?

when marginal costs are below average cost at a given output, one candeduce that, if output increases dose average costs fall or marginal costs will fall


What is the difference between average costs and marginal costs?

This is the economic distinction equivalent to fully absorbed cost of product and variable cost of product. Average cost is total cost divided by number of units. Marginal cost is the cost to produce the next unit (or the last unit


Explain Total cost marginal cost and average cost curves?

The increase or decrease in the total cost of a production run for making one additional unit of an item. It is computed in situations where the breakeven point has been reached: the fixed costs have already been absorbed by the already produced items and only the direct (variable) costs have to be accounted for.Marginal costs are variable costs consisting of labor and material costs, plus an estimated portion of fixed costs (such as administration overheads and selling expenses). In companies where average costs are fairly constant, marginal cost is usually equal to average cost. However, in industries that require heavy capital investment (automobile plants, airlines, mines) and have high average costs, it is comparatively very low. The concept of marginal cost is critically important in resource allocation because, for optimum results, management must concentrate its resources where the excess of marginal revenue over the marginal cost is maximum. Also called choice cost, differential cost, or incremental cost.Average CostIn economics, average cost or unit cost is equal to total cost divided by the number of goods produced (the output quantity, Q). It is also equal to the sum of average variable costs (total variable costs divided by Q) plus average fixed costs (total fixed costs divided by Q). Average costs may be dependent on the time period considered (increasing production may be expensive or impossible in the short term, for example). Average costs affect the supply curve and are a fundamental component of supply and demand.Total CostIn economics, and cost accounting, total cost (TC) describes the total economic cost of production and is made up of variable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery. Total cost in economics includes the total opportunity cost of each factor of production as part of its fixed or variable costs.The rate at which total cost changes as the amount produced changes is called marginal cost. This is also known as the marginal unit variable cost.

Related questions

What is happening to average total costs when they equal marginal cost?

That is were u now got your total cost


What is the relationship between marginal cost average total cost and average variable cost?

In the short run (which is what this question is about), as output increases, the average total cost decreases where the marginal cost is below it.First you have to realise that increasing and decreasing output will affect average fixed costs and average variable costs.Consider the following (explanation to these specific points is at the bottom of the page):Average fixed costs (AFC) decrease as output increases. A fall in average fixed costs leads to a fall in marginal costs.Let's call the decrease in AFC, and therefore a decrease in marginal costs, "X"Average variable costs (AVC) increase as output increases. It's the one most associated with marginal cost.A rise in average variable costs leads to a rise in marginal costs.Let's call the increase in AVC, and therefore an increase in marginal costs, "Y"It is possible to deduce that:When X is greater than Y, the decrease is greater than the increase in marginal costs. Because it's going down more than it's going up, marginal cost is going to get pulled down and fall.When X is less than Y, the decrease is smaller than the increase in marginal costs. Because it's going up more than it's going down, marginal cost is going to get pulled up and rise.You've just read about how marginal costs go up and down, according to the average variable & fixed costs. Now to pull in average total costs, as if it wasn't annoying enough.The average total cost (ATC) of the firm is found by: Average fixed costs + average variable costsAverage total cost essentially changes depending on marginal costs (MC).If marginal cost is below average total cost, the average is going to get pulled down.It's important to remember that MC can rise even if it's below the average... but eventually it will rise above it.If marginal cost is above average total cost, the average is going to get pulled up.Marginal cost always equals the average total cost when the average is at its lowest.This is when the two curves cross over each other, and is linked to the law of diminishing marginal returns.So, the change from a decreasing ATC to an increasing one is caused by a rising MC.Because AVC is the thing that really pulls MC up significantly, leading to the change, it is the most important factor when considering these types of costs... because AFC eventually flatterns out and doesn't really make a difference as output is increased more and more.Why does average fixed cost & average variable cost change?If output is increased, since fixed costs in the short run stay the same, average fixed costs will be lowered (average fixed costs = fixed cost divided by quantity of output). The cost is being spread out over the quantity.If output is increased, average variable costs necessarily increase, because variable costs are things like raw materials that you really need for production. If production output is at 0, then the average variable cost will be 0 too!


Does marginal cost curve always intersect the average cost curve at the average cost curve's lowest point?

When the marginal cost is below the average total costs or the average variable costs,then the AC would be declining.When marginal cost is above the average cost then the average cost would be increasing.Therefore the marginal cost should intersect with the average cost at the lowest point in order to pull the average cost upwards.


Relationship between marginal cost and variable cost?

Variable cost refers to the TOTAL variable cost of all units, whereas marginal cost is the variable cost of the last unit only. Variable cost is the sum of all the individual marginal costs. The derivative of the Variable Cost is the Marginal Cost. The integral of the Marginal cost is the Variable Cost.


What is the difference between average total costs and average variable costs?

Average total cost is the average of all your costs. This is your Fixed Costs and your Variable costs. Average Variable Cost is the average of your costs that can fluctuate.


If average cost increases does marginal cost increase?

It depends if the increase in Average Cost is caused by an increase in Fixed Costs or an increase in Variable Costs. An increase in Fixed Costs will not increase MC, because FCs do not vary with output (by definition) And increase in Variable Costs will increase MC


Do fixed and variable costs affect short-run marginal cost?

Fixed costs do not affect short-run marginal cost because they are just that- fixed. They are not dependent on quantity when it changes and does not vary directly with the level of output. Variable costs, however, do affect short-run marginal costs.


When marginal costs are below average cost at a given output one can deduce that if output increases what happens?

when marginal costs are below average cost at a given output, one candeduce that, if output increases dose average costs fall or marginal costs will fall


What is the connection between marginal returns and variable costs?

they are usually inversly proportional


What is the difference between average costs and marginal costs?

This is the economic distinction equivalent to fully absorbed cost of product and variable cost of product. Average cost is total cost divided by number of units. Marginal cost is the cost to produce the next unit (or the last unit


What is Total variable costs?

Total variable costs are the sum of expenses which change proportionally as the price of services and goods fluctuate. The total marginal costs above produced units is also referred to as total variable costs.


What is cost What is the difference between total cost and average cost?

Average total cost is the average of all your costs. This is your Fixed Costs and your Variable costs. Average Variable Cost is the average of your costs that can fluctuate.

People also asked