Question

Suppose Janet sells papayas at a perfectly competitive market in Thailand. While her average total cost (ATC) reaches a minimum level of $3, her minimum average variable cost (AVC) is $2.

a. At what level of output does Janet achieve her minimum average total cost (ATC)?

Answer: ______ units

b. At what level of output does Janet achieve her minimum average variable cost (AVC)?

Answer: ______ units

Answer 1

The level of output at which Janet achieves her minimum average total cost (ATC) is the same as the level of output at which she achieves her minimum average variable cost (AVC).

Step-by-step explanation:

To determine the output level at which Janet achieves her minimum average total cost (ATC), we need to look at the shape of the average total cost (ATC) curve. The ATC curve is typically U-shaped, with a minimum point where it meets the marginal cost (MC) curve. At this output level, the AVC and ATC curves are also at their minimum. Therefore, at the level of output where Janet's AVC reaches a minimum of $2, her ATC will also reach a minimum.

Similarly, at the output level where the AVC curve is at its minimum, the ATC curve will be at its minimum as well. Therefore, the level of output at which Janet achieves her minimum average variable cost (AVC) is the same as the level of output at which she achieves her minimum average total cost (ATC).