Econ 103 Question

[isapiens]

I have a problem were given the data i plot the marginal cost and average total cost curves on the same graph.

 

Then the problem asks to: "Identify the lowest per-unit cost on the graph."

 

I am confused about which curve am i supposed to use. Judging by the shape of the graph (u shaped)its gona be the average total cost one. However, i have a feeling the answer should be the point where those 2 graphs meet. But i cant understand what would that point actually mean.

 

See if you can help me.

 

PS: the book i am using is Essentials of Economics. Schiller 6e p126 problem 3

[Cap'n Refsmmat]

That point wouldn't be anything interesting, as far as I know. I'm guessing you're right about using average total cost.

[Realitycheck]

Cost is not one of my strong points, but it seems like these two graphs are not exactly comparable directly, since one is a cost per unit and the other is a derivative. Of course, I might be missing something here, such as an issue of semantics. It seems like you are supposed to find a sweet spot, such as the point where the average total cost equals the lowest marginal cost. If your data sets wind up within the appropriate ranges, then I would say, yes, that is what you are looking for.

 

You might want to read over these wikis and get a different perspective, see if that helps you.

Hope this helped.

 

http://en.wikipedia.org/wiki/Marginal_cost

http://en.wikipedia.org/wiki/Average_total_cost

 

Also, I could be making this too complicated for Econ 103. If your average total cost curve is shaped like a U, then I think that you want to keep it simple. It all depends on how your data sets match up.

[isapiens]

I dont really care if i get this problem wrong, its just a hw.

 

But here is something else annoying i forgot to mention.

 

Imagine that u shaped curve i was talking about - the average total cost curve. Well it doesn't just have one low point. It is flat at the bottom, so it has two points that are lowest and are equal to each other. But at the same time, only one of those points crosses the Marginal cost curve. (hard to explain and my scanner is broken, bummer)

 

Its a bogus problem. As of now i will just put the point where those two graphs cross as the answer. I will let you know what is the correct answer after i get the homework back.

[Mr Skeptic]

Does your marginal cost curve cross the zero axis at either of these minima? Unless the cost is zero something seems a bit fishy there.