input substituition
Not what you're looking for?
Explain why a change in a firm's total fixed cost of production will shift its average total cost curve, but not its marginal cost curve.
Provide two example of input substituition.
Purchase this Solution
Solution Summary
The input substituition is examined.
Solution Preview
The simplest way to see why changes in a firm's total fixed cost of production shifts average total cost curve but not the marginal cost curve is to look at their definitions.
ATC = Total Cost / Quantity = (Total Fixed Cost + Total Variable Cost)/Quantity = (Total Fixed Cost / Quantity) + (Total Variable Cost / Quantity)
MC = Change in Total Cost / Change in Quantity = (Change in Total Fixed Cost + Change in Total Variable Cost)/Change in Quantity
As output increases the fixed cost is still fixed, and there is no change in total fixed cost. Thus the equation becomes
MC = Change in Total Cost / Change in Quantity = (Change in Total Fixed Cost / Change in Quantity) + (Change in Total Variable Cost / Change in Quantity) = 0 + (Change in Total Variable Cost / Change in Quantity) = (Change in Total Variable Cost / Change in Quantity)
Thus fixed cost ...
Purchase this Solution
Free BrainMass Quizzes
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.