Question

3. The relationship between marginal and average costs

Consider the following scenario to understand the relationship between marginal and average values. Suppose Dmitri is a professional basketball player, and his game log for free throws can be summarized in the following table.

Fill in the columns with Dmitri's free-throw percentage for each game and his overall free-throw average after each game.  

On the following graph, use the orange points (square symbol) to plot Dmitri's free-throw percentage for each game individually, and use the green points (triangle symbol) to plot his overall average free-throw percentage after each game. 

 Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

 You can think of the result in any one game as being Dmitri's marginal free-throw percentage. Based on your previous answer, you can deduce that when Dmitri's marginal free-throw percentage is below the average, the average must be _______ .

You can now apply this analysis to production costs. For a U-shaped average total cost curve, when the marginal cost curve is below the average total cost curve, the average total cost must be _______ . Also, when the marginal cost curve is above the average total cost curve, the average total cost must be _______ . Therefore, the marginal cost curve intersects the average total cost curve _______ .

Answer 1

Game	Game Free Throw	Average Free Throw
1	80	80
2	60	70
3	20	60
4	60	60
5	80	65

falling, falling, rising, at its minimum

Answer 2

Answer 3

Answer #1 is correct.