Answer to Question #82588 in Microeconomics for Nate

Question

Why is the average total cost curve across a range of production in the short term "U" shaped? Describe completely
When will a farmer shutdown, and produce no corn for the year?
A farmer will produce an output where marginal cost equals___________

Answer 1

The average cost curve is u-shaped because of fixed costs and the law of diminishing returns.

A farmer shutdown, and produce no corn for the year, when P < AVC.

A farmer will produce an output where marginal cost equals marginal revenue.