A firm uses a single variable input x to produce outputs according to the production function f (x)= 300x 6x2.This firm has fixed costs of $400.This firm's short-run marginal cost curve lies below its short-run average variable cost curve for all positive values of x.

Question

Quizplus · Accepted Answer

The marginal cost (MC) is the derivative of the total variable cost (TVC), which is derived from the production function. The average variable cost (AVC) is the TVC divided by the quantity of output. Typically, MC intersects AVC at its minimum point, not lies below it for all positive values of x. The given statement contradicts the usual relationship between MC and AVC, as MC usually starts below AVC, intersects it at its minimum point, and then goes above it as output increases.

A Firm Uses a Single Variable Input X to Produce