A firm uses a single variable input x to produce outputs according to the production function f (x) = 300x 6x2. This firm has fixed costs of $300. This firm's short-run marginal cost curve lies below its short-run average variable cost curve for all positive values of x.

Question

Quizplus · Accepted Answer

The marginal cost (MC) is derived from the change in total cost with respect to output, while the average variable cost (AVC) is the variable cost per unit of output. For the MC to lie below the AVC, the MC must be decreasing, which is not the case here as the production function suggests increasing marginal costs due to the quadratic term (-6x^2).

A Firm Uses a Single Variable Input X to Produce