Good HOTS Questions. Answers needed.1.) Why MC is Not affected by TFC(3 marks)2.) True/false wth reason - AC curve falls only when MC curve falls(2marks)3') The minimum point of AC curve is to the right of AVC curve. WHY?(3 marks)4')(Explain) the shape of AR and MR curves in different market forms. (6 marks)Thank You Experts

Ans 1) ​We know that MC is defined as the addition to the total cost of a firm, which is incurred while producing one more unit of output. However, in short run, the fixed factors cannot be varied and accordingly the fixed costs ( TFC ) remain same (constant) throughout all output levels. Whereas, the variable costs ( TVC ) are positive function of output i.e. as output increases, variable costs also increases and vice-versa. In other words, while producing an additional unit of output, it is only the TVC that changes while TFC remains constant. This implies that while calculating MC , the fixed costs do not play a role as they remain constant throughout all the levels of output. 

Ans 2) Follow the below mentioned link.​

Ans 3) The minimum point of AC is to the right of minimum point of AVC indicating that AC reaches its minimum point much later than the minimum point of AVC. This is because of the fact that AC comprises of both the Average Fixed Cost and Average Variable Cost. Once AVC reaches its minimum, it starts rising. However, the initial rise in AVC is offset by the falling AFC such that AC still falls. it is only when the rise in AVC dominates over the fall in AFC that AC starts rising.

Ans 4) Under perfect competition market structure, AR equals MR at all output levels and the AR curve is a straight horizontal line parallel to the x -axis ( output -axis) that coincides with the MR curve.
Under imperfect competition market, both AR curve and MR curve are downward sloping and is falling throughout all levels of output, however,  the AR curve remains above the MR curve. 

  • 1
What are you looking for?