Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

CHAP. 7] COSTS OF PRODUCTION 159
curve. Past point S and S 0 , the law of diminishing returns is operating and the MC curve rises. The slope of (the
tangent to) the TC and TVC curves (i.e., the MC) at point E equals the lowest AVC, which is $26.25. This
gives point E 0 on the MC curve. The slope of (the tangent to) the TC and TVC curves (i.e., the MC) at point J
equals the lowest AC, which is $52. This gives point J 0 on the MC curve.
7.9 (a) On the same set of axes, draw the TVC curve and the TC curve of Problem 7.2; on another set of axes
directly below the first set draw the corresponding AVC, AC, and MC curves, (b) Explain briefly the
relationship between the shape of the TC and the TVC curves and the shape of the AVC, AC, and
MC curves, (c) Explain the relationship among the per-unit cost curves.
Fig. 7-10
(a) See Fig. 7-12.
(b) AVC equals TVC divided by output. AVC is given by the slope of a ray from the origin to the TVC curve. Up
to point E (the point where a ray from the origin is tangent to the TVC curve), the AVC falls Past point E, it
rises. AC equals TC divided by output. AC is given by the slope of a ray from the origin to the TC curve. Up to
point J (the point of tangency), the slope of the ray from the origin to the TC curve (i.e., the AC) falls. Past
point J, it rises. The MC curve can be obtained either from the slope of the TVC curve or from the slope of the
TC curve. The slope of the TC and TVC curves (i.e., the MC) falls up to the point of inflection (point S) and
rises afterward. Note that the MC between two points on the TC or TVC curve is given by the slope of the
chord between the two points. This is the average MC. As the distance between the two points approaches
zero in the limit, the value of the MC approaches the value of the slope of the TC or TVC curves at a point.