Microeconomics - Fixed costs and Average Variable costs
Say that a firm has fixed costs of $100 and constant average variable costs of $25.
a. Graph the AFC, ATC, AVC, and MC curves.
b. Explain why the curves have the shapes they do.
c. What law is not operative for this firm?
d. Say that instead of remaining a constant $25, average variable cost increases by $5 for each unit, so that the cost of 1 is $25, the cost of 2 is $30, the cost of 3 is $35 and so on. Graph the AFC, ATC, AVC, and MC curves associated with these costs.
e. Explain how costs would have to increase in (d) in order for the curves to have the "normal" shapes of the curves presented in the text.
I'm not necessarily asking for anyone to actually draw the graphs (if so awesome) but if you could just explain how to go about graphing this question that would be such a great help.
Thanks a lot for any help at all.