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

CHAP. 7] COSTS OF PRODUCTION 165
(b)
Fig. 7-15
(c)
When the LAC curve is falling, the corresponding LMC curve is below the LAC curve; LMC ¼ LAC when
LAC is lowest; and when the LAC curve is rising the LMC curve is above the LAC curve. When the LAC
curve has a flat bottom and looks like the LAC curve in Problem 7.14(a), the LMC curve will be below
the LAC when the LAC curve is falling, the LMC will coincide with the LAC when the LAC curve is
horizontal, and the LMC curve will be above the LAC when the LAC is rising.
7.16 (a) From SAC 1 , SAC 3 , and SAC 4 of Problem 7.12, find SMC l , SMC 3 , and SMC 4 .(b) On the same set of
axes, plot the LAC and LMC schedules of Problem 7.15, and the SAC I , SAC 3 , SAC 4 , SMC 1 , SMC 3 , and
SMC 4 , schedules of part (a). (c) Describe the relationship between the AC curves and their respective
MC curves and the relationship between the LMC curve and the SMC curves.
(a)
Table 7.10
Plant 1 Plant 3 Plant 4
Q SAC 1 ($) STC 1 ($) SMC 1 ($) Q SAC 3 ($) STC 3 ($) SMC 3 ($) Q SAC 4 ($) STC 4 ($) SMC 4 ($)
1 15.50 15.50 .. 5 10.00 50.00 .. 8 10.00 80.00 ..
2 13.00 26.00 10.50 6 8.50 51.00 1.00 9 9.50 85.50 5.50
3 12.00 36.00 10.00 7 8.00 56.00 5.00 10 10.00 100.00 14.50
4 11.75 47.00 11.00 8 8.50 68.00 12.00 11 12.00 132.00 32.00
5 13.00 65.00 18.00 9 10.00 90.00 22.00 12 15.00 180.00 48.00
(b) See Fig. 7-16.
(c) Whether dealing with the short run or the long run, the MC curve is below the corresponding AC curve when
the AC curve is falling; MC equals AC when AC is lowest; and the MC curve is above the AC curve when the
AC curve is rising. At the output level where SAC equals LAC (i.e., at the output level where the SAC curve is
tangent to the LAC curve), SMC equals LMC. When the LAC curve is declining, the point where SMC equals