Quiz 10 (2004/6/10)
(You can not open your notebook and textbook.)
Student Number:
Name:
Draw VC (Variable Cost) curve in Fig. 1, and draw AVC (Average Variable Cost) curve in Fig. 2.
Then explain why your AVC curve locates there?
TC
TC
FC
AC
AC
AVC
AC
AVC
FC
0
Q
Fig.1
0
Q1 Q2
Q
Fig.2
( The answer is in the figure.)
Because there is the relationship: TC = FC + VC , so in figure 1, we can draw AC curve just by
plotting the points of TC-FC, we got AC. And in figure 2, we use the equation:
TC FC VC
,
=
+
Q
Q
Q
we have: AC = AFC + AVC . Therefore AVC curve is under the AC curve, but the quantity at the
lowest point of AVC should be smaller than that of AC, that is: Q1 < Q2 (Think about why?).