At relatively low levels of output, the firm's aver age fixed cost dominates its average total cost, but at relatively high levels of output, the firm's aver age variable cost dominates. Why?
Answer to relevant QuestionsWhy would a firm switch from one short-run average total cost structure to another? Compose another table that shows AFC, AVC, ATC, and MC drawn from the data in practice problem 1, then graph each. According to the MR = MC rule, when the firm is producing at an output level where MR > MC, the firm should produce more. Explain. What is total profit (or total loss)? Why is the size of the firm not a very reliable criterion in identifying monopoly?
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