Question

a. Why do cost curves matter? b. Why do marginal amounts matter? c. How do cost curves affect society?

Answer 1

In firm 3 types of cost in present fixed cost, variable cost and total cost.Tc( Total cost) =fc+vc (fixed cost +variable costs)

Cost means producing a good is the sum of actual expenditure on purchase of input and imputed expenditure on input supplied by firm itself called cost.

cost curve is graph of costs of production as a function of total quantity produced. In freemarket economy, productively efficient firms use these curves to find the optimal point of production (minimizing cost), and profit maximizing firms can use t to decide output quantities to achieve those aims.

1)fixed cost curve matter in its own way fixed cost means cost which do not chnge with change in level of output. For ex if o goods is produced fc is 150 and if 1, 2, 3 unit of goods produced still fixed cost is same

Fixed cost same during short period whether amount of production is less or more or nil

2)variable cost curve in its own way variable cost means cost which vary with chnge in level of output. For ex if 0 unit is produced vc is zero and, 1unit is produced vc is 50 ,2 unit is produced vc is 70. Means cost increase when output increase and decrease when output falls.

3)total cost curve never be zero Beacause fixed cost is present in total cost.

Vc and tc curve are never intersect each other because difference between thm is fc which never zero The total cost curve is upward sloping (i.e. increasing in quantity). This simply reflects the fact that it costs more in total to produce more output.

B) marginal amount matter into two cost and revenue

Marginal means is addition of cost or revenue to the total when an additional unit of commodity is produced.or sale.

Marginal costl influence with total cost Marginal cost is addition of total cost when an additional unit of a commodity is produced. Additional cost can only be variable cost, fixed cost does not influence Mc.

Marginal revenue (Mr) indicates addition to TR when an addition unit is sold thus TR rise MR positive. TR Fall MR negative TR will remain unchanged when MR IS zero.

Marginal  cost means ncrease or decrease in the cost of producing one more unit or serving one more customer.marginal amount

C) cost curve affect society if more and more unit of goods is produced in short period variable cost is change and fixed cost remain same with the change in variable it leads to increases in employment in society if less unit is produced variable cost curve not generating employment