Economics Question

1 Using Figure 1. in Class Note 2 to explain why the average cost is initially high, then goes down, and is back up again?

(Make sure you understand the concepts of total cost, fixed cost, and variable cost).

2 Define marginal cost

3 Use Figure 2 in Class Note 2 to describe the marginal cost for a traditional product

(non-informational product)

4 Use Figure 4 in Class Note 2 to explain why the marginal cost for an informational product such as a CD, an ebook, an ejournal, can be constant

5 Use Figure 5 to point out the optimal production point and explain why

6 Explain why total cost always increases (see Figure 6 in Class Note 2)

7 Explain why the supply curve shifts upward when quantity increases (see Figure 7 in Class Note 2)