Question

3. The relationship between marginal and average costs

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

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

Answer 1

Solution:-

Game	Game Result	Total	Game Free – Throw Percentage	Average Free – Throw Percentage
1	6/8	6/8	6 / 8 * 100 = 75	6 / 8 * 100 = 75
2	2/8	8/16	2 / 8 * 100 = 25	8 / 16 * 100 = 50
3	2/4	10/20	2 / 4 * 100 = 50	10 / 20 * 100 = 50
4	8/10	18/30	8 / 10 * 100 =80	18 / 30 * 100 = 60
5	8/10	26/40	8 / 10 * 100 =80	26 / 40 * 100 = 65

Game Free-Throw Percentage Average Free Throw Percentage FREE-THROW PERCENTAGE CAME

As shown in the figure when the marginal value is falling, the average value is more than the marginal value. Thus, from this it is shown that marginal free-throw percentage is below the average, the average must be falling.

Thus, the analysis state that when the marginal cost curve is below the average total cost curve, the average total cost curve must be falling.

Also, when the marginal cost curve is above the average total cost curve, the average total cost must be rising.

Therefore, the marginal cost curve intersects the average total cost curve at its minimum.