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Why does opportunity cost decreases on the Indifference curve?
Wiki User
∙ 10y ago
If our preferences convex, the indifference curve exhibits decreasing marginal rate of substitution. That is, the more you consume of good X, then you are willing to give up less of good Y. Thus, the opportunity cost of exchanging good Y decreases as we get more of good X.
Wiki User
∙ 10y ago
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Types of opportunity cost using production possibility curve?
constant, decreasing and increasing
Draw a production possibility curve and use it to explain scarcity choice and opportunity cost?
Production Possibility Curve this is an image of a ppf/ ppc
A popular model used to illustrate the concept of opportunity cost is?
The Production Possibilities frontier/curve
How can the production possibilities curve illustrate opportunity cost?
It shows weather the item you are talking about is increasing or decreasing.
Does an economy that is inside its production possibilities curve face any trade-offs?
If there are opportunity cost, then yes my friend, they do.
Opportunity cost curve?
Look up Production Possibility Frontier, it is the same thing as a Opportunity Cost Curve.
Types of opportunity cost using production possibility curve?
constant, decreasing and increasing
Draw a production possibility curve and use it to explain scarcity choice and opportunity cost?
Production Possibility Curve this is an image of a ppf/ ppc
A popular model used to illustrate the concept of opportunity cost is?
The Production Possibilities frontier/curve
How can the production possibilities curve illustrate opportunity cost?
It shows weather the item you are talking about is increasing or decreasing.
Explain why a production possibilities curve is concave?
Because when one produces one product, the opportunity cost of the other product increases i.e. the concave represents the increasing opportunity cost with the production of a good.
Does an economy that is inside its production possibilities curve face any trade-offs?
If there are opportunity cost, then yes my friend, they do.
How can production possibilities frontier explain law of increasing opportunity cost?
The shape of the curve is convex to the origin which shows increasing opportunity cost. Consider the changes in reduction of one good's output as production of the other good is increased by the same amount. as the reduction progresses it will become greater due to steeper gradient.
Why does the marginal cost curve cut through the average variable cost curve exactly at the minimum of the average variable cost curve?
Marginal cost curve cuts average cost (variable or total cost) at its minimum simply to portray the law of variable proportions. The idea is as labor is increased with capital being fixed, productivity increases upto a point and then decreases and later becomes negative. To relate the same productivity with average cost function, the average cost first decreases , reaches a minimum and then increases. Now marginal cost is just a change in the total cost. Logic says that when MC is less than AC productivity is favourable, thus cost is falling. When MC is more than AC productivity is not favourable and thus the rising portion of the cost curve. When MC = AC , the productivity that was reducing the average cost per unit has maximized and from then on starts rising cost(or decreasing productivity). That is the only point where they can intersect.
Indicate how each of the following would shift 1. the marginal cost curve 2. the average variable cost curve 3. the average fixed cost curve and 4. the average total cost curve of a manufacturing firm?
a. Property taxes are fixed costs, so this would decrease AFC, which in turn decreases ATC.b. Wages are typically variable costs, so this would increase both MC and AVC, which in turn increases ATC.c. Electricity is typically a variable cost, so this would decrease both MC and AVC, which in turn decreases ATC,d. Insurance is a fixed cost, so this would increase AFC, which in turn increases ATC.
6 If the average total cost curve is falling what is necessarily true of the marginal cost curve If the average total cost curve is rising what is necessarily true of the marginal cost curve?
When average total cost curve is falling it is necessarily above the marginal cost curve. If the average total cost curve is rising, it is necessarily below the marginal cost curve.
What is opportunity cost and opportunity benefit?
Opportunity cost is the cost that an opportunity presents. The opportunity benefit is the benefit of the opportunity that is being presented.
