# Tag Info

Accepted

### Supermarket selling seasonal items below cost?

Is it simply for saving warehouse costs? Probably yes, holding onto inventory is very expensive. You have to pay for warehousing of the good, it takes the spot of some other inventory that might be ...
• 2,734

### Does a store suffering increased theft generally cause higher prices?

prices should have already been set to maximize the trade off between profit-per-sale and volume sold But profit-per-sale depends on costs, which depends on the theft numbers, so if theft increases, ...
• 29.3k

### Does a store suffering increased theft generally cause higher prices?

What you're describing is retail shrink. It is taken into consideration when setting prices. A business will typically have consultants come in, measure their shrink to be X percent, and prices will ...
• 301

### Supermarket selling seasonal items below cost?

It's not about saving warehousing cost. They can't sell 12 months old Christmas chocolate next year, so they have to sell it in the next few months. Their options are to either sell it to customers, ...
• 261
Accepted

### Fixed cost of a firm

It is the first one, $TC(0) = FC$. This is the definition. Also consider that it is not clear what is "transformed by $q$ in some way". In case of $$\frac{5q}{q+1} + \frac{5}{q+1}$$ are the two ...
• 29.3k

### Does a store suffering increased theft generally cause higher prices?

Price is set by the competition In general, the prices are set by the supply and demand for the whole market. If a merchant sells the same goods for a higher price than competitors without a ...
• 488
Accepted

### Understanding the shape of a Marginal Cost Curve

I'll offer a less algebraic alternative to Alecos's answer. In short, yes and no. The "no" part Normally the MC and AC curves would look like the following, with MC intersecting AC from ...
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• 3,431

### Is it possible to have constant marginal cost and decreasing average cost simultaneously?

Short answer: Yes, it is possible. Decreasing average cost implies that marginal cost is less than average cost ($MC<AC$, which can be proved by simply taking the first derivative of $C(q)/q$). ...
• 125

### Is it possible to have constant marginal cost and decreasing average cost simultaneously?

Yes, if there are non-zero fixed costs, and constant marginal cost, then average cost decreases strictly monotonically with quantity, asymptotic to the marginal cost.
• 8,168

### Decision over "max" production function:

Hint For profit maximization, either $x_1$ or $x_2$ (but not both) must be zero. If not, say $x_1^*>x_2^*>0$ at the optimum, then one could increase profit by lowering cost by reducing $x_2^*$ ...
• 15.4k
Accepted

### Is there a cost to running the NewYork Stock Exchange? Does it affect the price of stocks sold on the exchange?

Yes, there's a cost to running the New York Stock Exchange. There's the premises, utility bills, staff, systems, and so on. Yes, this affects the price of stocks on the exchange. The exchange recoups ...
• 8,168
Accepted

### How to Graph Short-Run Average Cost?

$\newcommand{\fone}{\color{red}{f_1(q)}}$ $\newcommand{\ftwo}{\color{blue}{f_2(q)}}$ For the sake of simplicity, call  f(q) = \frac{w}{k}q + \frac{rk}{q} = rk\left(\underbrace{\frac{1}{q}}_{\fone}...
• 1,216
Accepted

### Why is the short run average cost curve not a tangent to the long run average cost curve at the lowest point on the short run average cost curve?

The diagram is fine as an illustration of a possible relation between the long run average cost curve and one particular short run average cost curve. Long run in the context of a firm's cost ...
• 8,529
Accepted

### fixed an marginal cost calculation issue

The marginal cost is 3. Marginal costs do not depend on the fixed cost, and when your variable costs are constant, then the marginal cost and the variable cost are the same. Note that your total cost ...
• 4,188
Accepted

### Deriving long-run cost functions from production function

Don't get stuck with math. Look again at the production function. Perhaps draw out isoquant curves (for the same output, how could you vary $K$ and $L$). How are the isoquants for this production ...
• 2,792
Accepted

### How to calculate the minimun of Average Fixed Cost knowing the Average Fixed Cost

As the quantity of output of a good increases, fixed cost (by definition) remains the same and therefore average fixed cost per unit of output continuously decreases. Therefore the average fixed cost ...
• 8,529

### Relation between marginal cost and output elasticities

I figured it out: The first-order condition of the cost minimization problem for, say, material inputs $m_{it}$ gives: $\lambda \frac{\partial F}{\partial M} = P_M$ Where F is the production ...
• 497

### Why min AC = min SRAC at the minima of AC curve?

Short-run implies that some decision variable cannot be free set, it is fixed for a time (in the short-run). In the long-run all variables may be freely set. Let us denote the fixed variable by $x$. ...
• 29.3k

Some economists (Oliver Hart and John Moore are among the most prominent) have developed a "theory of the firm" which could help address some of the issues involved. One of the considerations in that ...
• 2,668
Let $C(y)$ denote the cost function and $y$ the quantity. The average cost function is $AC=C/y$. This is increasing if its derivative is positive. Let $C'$ denote the derivative of $C$. The marginal ...