Saved Bookmarks
| 1. |
Show with the help of numerical example that average cost is constant when marginal cost is equal to it. |
||||||||||||||||||||||||
|
Answer» Following table considers a situation when MC = AC over a range of output. It is a situation of constant returns to a factor.
The table shows that when constant returns to a factor prevail over a range of output (1-5 units of output), MC remains constant. Consequently, TC increases at a constant rate and MC and AC are found to be equal to each other. In the entire range of output when AC = MC, AC is also found to be constant (like MC). |
|||||||||||||||||||||||||