Suppose an Industry Has No Fixed Costs

question 24

Essay

Suppose an industry has no fixed costs.Draw two graphs side by side for the industry.In the left graph draw a U-shaped average cost curve and the corresponding marginal cost curve.In the right graph,draw a downward sloping market demand curve.Also in the right graph,draw a short-run supply curve that would generate positive profit,and the long-run supply curve that would result in.

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Definitions:

Total Manufacturing Cost

The aggregate of all costs—direct materials, direct labor, and manufacturing overhead—incurred in producing finished goods.

Raw Materials

are the basic, unprocessed inputs used in the manufacture of goods and products.

Indirect Materials

These are materials used in the production process that are not directly traceable to the finished product.

Production

The process of creating goods and services through the combination of labor, materials, and technology.