Re: ECO601 GDB 1 Solution and Discussion
Total Marks 10
Starting Date Tuesday, June 02, 2020
Closing Date Saturday, June 06, 2020
Question Title GDB
Graded Discussion Board
Business Econometrics (ECO601)
In Economics, the change which is observed in the total cost due to the production of one more unit of a product/output is called marginal cost. In most of the industrial production, initially, the marginal cost falls as the volume of production increases because of economies of scale. In the beginning, costs are lower for the reason that there are some discounts on the factors that are engaged in performing different tasks like, bulk purchases of raw materials, efficient use of machinery and specialized labors. However, a point arises in the production process where the marginal cost will start to rise again as a result of diseconomies of scale. At this stage, the cost may rise because of various factors like to spend more money to obtain the sources, buy more equipment, hire more management, and tap out a local source of raw materials.
Now consider the following marginal cost function (MC) where Q is the level of output:
In this given function; a, b and c are coefficients. Now discuss what will be the conditions (signs) of coefficients b and c in order to get the required shape of the marginal cost (MC) curve? If the required condition of coefficients for the MC curve is violated then what will be the shape of the curve?