Answer to Question #323782 in Microeconomics for rubaiya

Question

  A customer care company is considering replacing human telephone operators with computers.

Create your own example, schedule and graph:

a The average cost curves and the marginal cost curve when the firm uses human operators.

b The average cost curves and the marginal cost curve when the firm uses computers.

Answer 1

Marginal cost( MC). It is the cost of producing an extra unit of output, whereas average cost depicts the total cost over quantity. Marginal cost and average cost curves are U-shaped. The relationship between the quantity of output produced and the cost of producing the output. Fixed costs are shown as the vertical intercept of the total cost curve incurred when output is zero. In this case, the onset of production, the total cost, and variable costs rise. Therefore in the case of human operators, there will be an increase at a decreasing rate whereas in the case of computer usage there will be an increase at an increasing rate of production .