Micro Final

(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly firm producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. To maximize profits, Lenoia should charge a price of:

$400.

(Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:

$408.

(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 6 purses is:

$50.

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is in a perfectly competitive industry, how many subscriptions will it sell?

8

If marginal cost is equal to average total cost: You Answered

average total cost is at its minimum.

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:

$0.

(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $67.50, how much is Sergei's profit at the profit-maximizing output?

$100.00

(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. This firm's cost per unit at its profit-maximizing quantity is:

$18.

(Table: Cost Data) Look at the table Cost Data. The marginal cost of producing the fifth purse is:

$50.

(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 2 purses is:

$60

(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average fixed cost is _____, average variable cost is _____, and average total cost is _____.

$7.84; $11.76; $19.60

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel, split the production of output equally, and acted to maximize total industry profits, each firm's output would be _____ and each firm's profit would be _____.

1,000; $10,000

A monopoly will have a Herfindahl-Hirschman index equal to:

10,000.

(Figure: Payoff Matrix I for Blue Spring and Purple Rain) The figure Payoff Matrix I for Blue Spring and Purple Rain refers to two producers of bottled water. Each has two strategies available to it: a high price and a low price. The Nash Equilibrium is:

L, L

Which of the following statements about the differences between monopoly and perfect competition is INCORRECT?

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.

average (total) cost

TC/Q total cost divided by quantity of output

average variable cost

VC/Q the sum of all costs that change as output changes divided by the number of units produced

(Figure: Payoff Matrix I for Blue Spring and Purple Rain) The figure Payoff Matrix I for Blue Spring and Purple Rain refers to two producers of bottled water. Each has two strategies available to it: a high price and a low price. The dominant strategy for Purple Rain is to:

adopt the same strategy as Blue Spring.

The large barriers to entry are a reason a monopoly:

earns an economic profit in the long run

One framework used to analyze strategic choices is:

game theory.

In the short run, if P = ATC, a perfectly competitive firm:

produces output and earns zero economic profit.

Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by:

producing more than the quantity that maximizes joint profits.

oligopolies exist in a market that has a small number of producers that may or may not exhibit product differentiation

true

in game theory, a dominany strategy is

the best strategy to pick, no matter which moves are chosen by the other player

Perfect competition is characterized by:

the inability of any one firm to influence price.

In economics, the short run is defined as:

the period in which some inputs are considered to be fixed in quantity.

true or false airlines are often able to price discriminate

true

which of the choices best explains why this price will cause the firm to shut down instead of continuing to operate at a loss? total variable costs < total fixed costs total revenue > total variable costs total revenue < total fixed costs total revenue < total variable costs total variable costs > total fixed costs total revenue > total fixed costs

total revenue < total variable costs

true or false all else being equal, single price monopolistic competitors earn lower profits than firms that can price discriminate

true

true or false price leadership occurs when one firm announces a price change and other firms match the announced price

true

Which of the following scenarios best describes an oligopolistic industry?

Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.

If a monopolist is producing a quantity that generates MC > MR, then profit:

can be increased by decreasing production.

The Sherman Antitrust Act:

was aimed at preventing the establishment of more monopolies and was the beginning of antitrust policy.

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

There is not enough information given to answer this question.

the long run is best defined at a time period that is longer than one year during which all inputs can be varied during which prices of other goods change during which at least one input cannot be changed

during with all inputs can be varied

Price discrimination leads to a _____ price for consumers with a _____ demand.

higher; less elastic

If rival solar roof panel manufacturers in Reno limit production and _____ prices in a way that increases their profits without meeting with one another in a formal way, they are engaging in _____ collusion.

lower; tacit

(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____.

increases; increases

(Table: Cost Data) Look at the table Cost Data. When the purse factory produces 5 units of output (purses):

marginal cost is above average total cost, and average total cost is rising.

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a _____ demand for bus service than other passengers.

more elastic

one thing that distinguishes the short run and the long run is the existence of variable costs the number of months considered the existence of at least one fixed input implicit costs

the existence of at least one fixed input

a firm's ____ are costs that increase as quantity produced increases. these costs often show ___ illustrated by the increasingly steeper slop of the total cost curve. variable costs; diminishing marginal returns fixed costs; opportunity costs fixed costs; technological changes variable costs; constant returns to scale

variable costs; diminishing marginal returns

for firms in perfectly (purely) competitive markets, long run economic profits are ___ because firm will ____ this market if profits are less than that and __ if profits are greater

zero exit enter

(Figure: Short-Run Costs) Look at the figure Short-Run Costs. A is the _____ cost curve.

marginal

The short-run supply curve for a perfectly competitive firm is its:

marginal cost curve above its average variable cost curve.

(Figure: Revenues, Costs, and Profits for Tomato Producers II) Look at the figure Revenues, Costs, and Profits for Tomato Producers II. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $10. At the farmer's profit-maximizing output, total revenue is _____, total cost is _____, and profit is _____.

$30; $48; -$18

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is in a perfectly competitive industry, how much is consumer surplus?

$320

(Figure: Revenues, Costs, and Profits for Tomato Producers) Look at the figure Revenues, Costs, and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. At the profit-maximizing quantity of output in the figure, the farmer's total revenue is _____, total cost is _____, and profit is _____.

$90; $70; $20

(Figure: A Rock Climbing Shoe Monopoly) Look at the figure A Rock Climbing Shoe Monopoly. If the firm acts to maximize profit, the firm will earn profit equal to:

(P1 - P4) × Q2.

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel and are maximizing total industry profits and splitting the production of output evenly between themselves. If Margaret decides to cheat on the agreement and sell 100 more gadgets, how many gadgets will she sell?

350

(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $67.50, how many tubs of ice cream will Sergei's firm produce?

4

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel and acted to maximize total industry profits, total industry output would be _____ and the price would be _____.

500; $5

(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor. The total product for three workers is _____ bushels.

51

what is a natural monopoly? a monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors a monopoly that results from goverment issuing patents a monopoly resulting from one firms exclusive ownership of a natural resource required to produce a good a market in which there is only one firm

a monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors

The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, cornflakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of:

a standardized product.

classify the assumption according to whether or not each item is an assumption in a perfect competition or not in a perfect competition

assumed in perfect competition: price taking behavior not assumed in perfect competition: a small number of producers significant barriers to entry firms selling a similar but differentiated

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is consumer surplus when the monopolist maximizes profit?

$80

(Table: Labor and Output) Look at the table Labor and Output. The marginal product of the fifth worker is:

4.

(Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. If the market price is $4.50, the profit-maximizing output is _____ units.

8

Which of the following is TRUE?

It is difficult to determine how much tacit collusion exists in a particular industry; hence tacit collusion remains hard to prosecute in the United States.

which statement described a monopoly many firms produve idential products with no control over the market price many firms produce differentiated products with control over market price a single firm produces a product with no close subsitiutes and control over the market price a single firms produces a product with many close substitutes and limited control over the market price

a single firm produces a product with no close substitutes and control over the market price

To be called an oligopoly, an industry must have:

a small number of interdependent firms.

In perfectly competitive long-run equilibrium:

all firms produce at the minimum point of their average total cost curves

Suppose that in the small town, Prairie, there are only 2 cable providers what type of market structure does the local cable marekt have?

duopoly

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, consumer surplus will be:

$0.

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets, Margaret's profit will be _____ and Ray's profit will be _____.

$1,400; $1,000

(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. This firm's profit per unit is:

$12.

Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

$19.

Iz, Lauren, Off, and Ralph started a tshirt company. they can produce any number of tshirts at a cost of $2 per shirt, both marginal and average. they are the only producers of tshirts. as monopolists, they charge $20 per shirt and obtain total profits of $10,000. now assume there are creative differences and they split the company in 2. lauren and ralph join together and compete against iz and add. if they compete on quantity, each company would produce 50 shirts and charge $12 a shirt. for technical reasons, assume that the quantity demanded is greater than 0 for all prices greater than $50. if however, ralth and lauren compete directly against iz and odd in prices, the market for t shirts will be

$2 and their profits will be $0 in repsonse to the price war, iz and odd decide to put an iguana on the chest of their t shirt. they convince the world that the iguana is necessary for coolness. this type of behavior is called product differentation what economic reason is likely to have caused is and odd put an iguana on their shirt increase profits

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. If these two producers formed a cartel and acted to maximize total industry profits, total industry profit would be:

$2,500.

(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The marginal revenue of the fourth unit of production is:

$250.

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 25 bushels of soybeans is:

$250.

(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $67.50, how much is Sergei's total revenue at the profit-maximizing output?

$270.00

suppose you are a manager of a firm that operates in a duopoly. recently, the state attorney general fined you and your competitor for price fixing. in your market, firms only set prices, not total quantities to sell. from previous experience, you know your competitor has a marginal cost of $3.10. further, your marginal costs are $3.08. the previous cartel price was $10.00, when you and your competitor were price fixing. what price level do you now choose to maximize profits

$3.09

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

$30.

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets with no marginal cost or fixed cost. Suppose that these two producers have formed a cartel, agreed to split production of output evenly and are maximizing total industry profits. If Margaret decides to cheat on the agreement and sell 100 more gadgets, the market price of gadgets will be:

$4.

Mr. Porter sells 10 bottles of champagne per week at $50 per bottle. He can sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the price effects on total revenue would be, respectively, an increase of _____ and a decrease of _____.

$45; $50

(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $14, in the short run, the farmer will produce _____ of corn and earn an economic _____ equal to _____.

4 bushels; profit; $0

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If both follow a tit-for-tat strategy, equilibrium will be reached when Gehrig produces _____ figurines and Gabriel produces _____ figurines.

5,000; 5,000

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. The combined profits of the two are maximized if Gehrig produces _____ figurines and Gabriel produces _____ figurines.

5,000; 5,000

(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, then it will sell _____ subscriptions.

6

(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each firm can produce gadgets at a marginal cost of $2 and no fixed cost. If the industry were perfectly competitive, the output would be _____ gadgets, and the price would be _____.

600; $4

(Figure: Payoff Matrix for Ajinomoto and ADM) Look at the figure Payoff Matrix for Ajinomoto and ADM. The Nash equilibrium combination occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

Both 30; 40 and 40; 30 are Nash Equilibrium

(Figure: Payoff Matrix for Ajinomoto and ADM) Look at the figure Payoff Matrix for Ajinomoto and ADM. The optimal combination for maximum combined profit occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

Both 40; 30 and 30; 40

which firm is most likely to be a naturl monopoly a pharmaceutical company that has the exclusive right to sell a patented drug a firm that owns nearly all the diamond mines in the world a restaurant that is unable to practive price discrimination and must charge all consumers the same price Municipal Power Light, the local supplier of electricity

Municipal Power Light, the local supplier of electricity

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing price is price:

N.

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The marginal cost of producing the profit-maximizing quantity is cost:

P.

Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and earns economic profits. Which statement is FALSE?

Price is equal to average total cost.

(Figure: A Rock Climbing Shoe Monopoly) Look at the figure A Rock Climbing Shoe Monopoly. If the firm acts to maximize profit, the firm will sell _____ pairs of shoes at _____ per pair.

Q2; P1

You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power?

You own exclusive rights to harvest lemons from all domestic citrus orchards.

marginal cost

^TC/^Q the amount by which total cost increases when an additional unit is produced change in total cost divided by change in output

Lieutenant Idaho is a superhero who can change any object into a potato with his special work. chicken wing has a bow that shoots magical drumsticks at people, and cast iron woman wields an impossibly heavy skillet. since all 3 have racked up massive student loans, they each decided to form sole proprietorships and fight super villains and repel alien invasions for a fee. being the only people in the world able to withstand the super villian and aliens, they formally agree to team up, restrict how much work they each do, and charge a price much higher than their marginal cost. what is the economic term for this group?

a cartel

sort items according to whether they are associated with a single price monopoly or perect competition

a characteristic of monopoly: the price is higher than in other market structures firms can earn positive economic profic in the long run there are significiant barriers to entry a charcteristic of perfect competition: an efficient quantity is produced firms have no market power

which of the statements is not true a marginal cost curve will always intersect the average variable cost curve at the minimum average variable cost costs that are small and unimportant with little impact on profits are called marginal costs marginal cost is the change in a firms variable cost due to one unit change in output marginal cost and marginal producitivty are inversely related

costs that are small and unimportant with little impact on profits are called marginal costs

monopolistic competition is a market structure that consists of a small number of producers

false

true or false firms do not have an incentive to price discriminate because it results in some groups paying a lower price than other

false

true or false perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others

false

true or false price discrimination is illegal under all circumstances

false

true or false price discrimination only occurs with natural monopolies

false

true or false price leadership prevents cooperation among competing firms

false

true or false price leadership is illegal

false

true or false: monopolies produce differentiated products

false

true or false: perfect (pure) competition is charaxterized by product differentiation

false

everything looks like a nail inc is a manufacturing company that produces hammers. the company faces a number of different fixed and variable costs in the short run. determined which of teh costs are examples of fixed costs and which are variable costs. assume the company cannot easily adjust the amount of capital that is uses and that salaries are negotiated only once a year lease on building cost of metal used in manufactoring industrial equipement costs cost of wood used in manufactoring interest on current debt regulatory compliance costs postage and packaging costs annual salaries of top management

fixed costs: lease on building industrial equipment costs interest on current debt regulatory compliance costs annual salaries of top managment variable costs: cost of metal used in manufactoring cost of wood used in manufacturing postage and packaging costs

a firm's ___ are costs that are incurred even if there is no output. in the short run, these costs ___ as production increases fixed costs; increase fixed costs; do not change variable costs; increase

fixed costsl do not change

Product differentiation is most likely to occur when firms:

have tacit agreements not to engage in price wars.

nola and charles both own party planning firms in the same small town of Trident, IA. because they are the only party planners in town, they want to collude to make the price of party planning high. classify the scenarios according the whether they are more likely to help impede Nola and Charles colluding

helps collusion: charles and nola both charge a fixed price per person for a party nola and charles are regulars at the same coffee house. they talk regularly. impedes collusion: a party planning school opens and the new graduates are ready to plan charles develops a signature appetizer that becomes the must have appetizer in trident nola lowers her price on national television nola marginal cost is lower than charles most of the parties are given tridents largest employer, a water bottling plant

which of the statements is true of the prisoner's dilemma?

in the prisoner's dilemma, firms could do better if they both did exactly the oppsite of what they ultimately choose to do

Price in a perfectly competitive industry:

is always equal to marginal revenue for the firm.

determine if each example represents a barrier to entry or not

is an example of a barrier to entry: pfizer is the only firm that is legally allowed to produce and sell lipitor, a best selling cholesterol drug debeers owns nearly all of the world's diamond mines boeing already serves a large fraction of teh jumbo jet market and is able to produce at a lower average cost than potential competitors is not an example of a barrier to entry: tinseltown theaters shows almost all the most popular newly-released movies

bozo is a clown. he wants to start a clowning business where he sends other clowns out to birthday parties. use the graph to answer the questions. what is the marginal product of the 3rd unit of labor. this production function demonstrated: diminishing marginal returns to labor diminishing output a negative marginal product of labor dimishing marginal costs

marginal product: 2 birthday parties this production function demonstrates diminishing marginal returns to labor

At the current level of output, Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:

must be rising.

Gary's Gas and Frank's Fuel are the only two providers of gasoline in their small town. Gary and Frank decide to form a cartel to raise the price of gasoline. The total industry profits are highest when _____ cheat(s) on the agreement, and Gary's profits are highest when _____.

neither firm; Gary cheats but Frank does not

(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and Gabriel describes two people who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. For Gehrig and Gabriel, the dominant strategy is to:

produce 7,000 figurines.

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4, the firm will produce quantity _____ and _____ in the short run.

q3; make a profit

suppose ralph has a chicken processing plant with the total cost function shown in the accopmanying table. what is ralphs fixed cost? ralph pays his workers $100 each, and labor is the only variable cost. at a quantity of 1000 chickens, how many workers does he hire? why does total cost increase faster as output increases? the variable cost increases there are increasing returns to scale the fixed cost increases there are diminishing returns to labor

ralph's fixed cost: $800 number of workers ralph hires: 2 there are diminishing retunrs to labor

in the short run, perfectly (or purely) competitive firms will maximize their profit by producing which of the following choices any quantity where marginal revenue > marginal cost the quantity where marginal revenue = marginal cost the largest quantity possible, not considering costs or revenues a small quantity to drive up the price the quantity where price equals marginal cost

the quantity where marginal revenue = marginal cost the quantity where price equals marginal cost

true or false price leadersip is a form of implicit (tacit) collusion

true

determine which of the statements and expressions regarding costs are true or false

true: all costs are either fixed or variable when fixed costs are positive, the average fixed cost curve is downward sloping the ATC is always greater than or equal to AVC ATC= FC+VC?Q MC refers to the change in total cost associated witht he production of another unit false: average fixed cost is always higher than average variable cost the ATC crosses the MC at the lowest point on the MC the ATC is rising when the MC is below the ATC the ATC is increasing whenever the MC is increasing the VC curve is modeled as a horizontal line TC=FC+VC+MC

If two firms are identical in all respects except that one has more of the fixed input capital than another, the total product curve for the firm with more capital:

will lie above the total product curve for the firm with less capital.