Show with the help of numerical example that average cost is constant when marginal cost is equal to it.

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Show with the help of numerical example that average cost is constant when marginal cost is equal to it.

Monjur Alahi

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2025-01-04 04:42

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Salim Ahmed Kawsar · Accepted Answer · 2023-02-05T15:29:48+06:00

Following table considers a situation when MC = AC over a range of output. It is a situation of constant returns to a factor.

Output	Total Cost	MC	AC
1	10	10	10
2	20	10	10
3	30	10	10
4	40	10	10
5	50	10	10

The table shows that when constant returns to a factor prevail over a range of output (1-5 units of output), MC remains constant. Consequently, TC increases at a constant rate and MC and AC are found to be equal to each other. In the entire range of output when AC = MC, AC is also found to be constant (like MC).