Suppose the total cost of producing 50,000 telephones is $500,000. Suppose also that at an output of 30,000, the average total cost is $8 and the marginal cost is $6. What is true about the minimum of the average total cost curve?

Question

Quizplus · Accepted Answer

The average total cost (ATC) at 30,000 units is $8, and since the marginal cost (MC) of $6 is less than the ATC at this point, it indicates that the ATC is still decreasing. Therefore, the minimum of the ATC must occur at a point beyond 30,000 units and must be less than $8, as the MC pulls the ATC down until it equals the MC.

Suppose the Total Cost of Producing 50,000 Telephones Is $500,000