Monday, June 27, 2011

verage Total Cost

The average total cost or what is simply called average cost is the total cost divided by the number of units of output produced.

Average total cost = total cost / output

Or ATC = TC/ Q   

Since the total cost is the sum of total variable cost and the total fixed cost the average total cost.

Is also the sum of average variable cost and average fixed cost? This can be proved as follows:

ATC = TC / Q

Since TC = TVC + TEC

Therefore ATC = TVC + TFC / Q = TVC / Q + TFC / Q = AVC + AFC

Average total cost is also known as units cost since it is cost per unit of output produced. As the average total cost is the sum of average variable cost and average fixed cost, in it can be obtained by summing up the figures of columns 5 and 6 corresponding to different levels of output, thus for example with two units of output average total cost is $ 25 + $ 17.50 = $ 24.50 and with three units of output it is equal to $ 16.67 + $ 20 = $ 36.67 and so on for other levels of output. Alternatively the average total cost can be obtained directly form dividing the total cost by the number of units of output product. Thus average total cost of 2 units of output is equal to $ 85/2 ro $ 42.50 likewise when output is readied to 6 units total cost rises to 240 and average total cost words out to be $ 240/6 = $ 40.

If follows from above that the behaviour of the average total cost curve will depend upon the dehaviour of the average variable cost curve and average fixed cost curve. In the beginning both AVC and AFC curve is falling steeply’ the ATC curve continues to fall. This is because during this stage the fall in AFC neither curve weight nor than the rise in the AVC curve. But as output increases further there is a sharp rise in AVC which more than offsets the fall in AFC. Therefore the ATC curve rises after a point. Thus the average total cost curve (ATC) like the AVC curve first falls reaches its minimum value and then rises. The average total cost curve (ATC) is therefore almost of a U shape.

Thursday, June 16, 2011

Economic Integration

All countries in the modern world do not follow a uniform discriminatory trade policy several forms of economic integration have come into existence such as removal of trade barriers (especially tariffs) among certain countries and discrimination against others. The most important forms of such international economic integration are (i) free tide areas, (ii) customs unions and (iii) common markets.

A free trade area refers to the group of countries which have abolished all tariff barriers amongst themselves but each individual country is free to maintain any level of tariff against other countries.

A customer union is an agreement between members of a group of nations to abolish all custom duties (tariffs) levied in trade amongst them at the same time establishing common tariffs agent imports from the non member countries. It is thus also referred to as the external tariff. A notable difference between a customs union and a free trade area is that in the former there is a common structure of custom duties adopted by all the member countries while trading with non member countries, in the latter case however the members follow different discriminatory individual tariff schedules against non member countries.

Further a customs union may be either limited or it may be complete. A limited customs union may involve only one commodity or a few commodities at the most while a complete union consists of the abolition of all restrictions on the movement goods and factors of production as well as the adoption of commonly integrated fiscal and monetary policies such a complete union is known as an economic union.

The formation of a common market however implies a highest degree of interdependence amongst the member countries. Under the common market economic integration permits not only the free movement of goods among member countries, but all the factors of production too can move freely.

Economists have however focused their attention on the institution of customs union, the analysis of which is supposed to be easily extendible to the case of free trade areas and common markets and programming solutions. Following the tradition we too will take up here only the customs union in its general form so as to equip ourselves with an analytical framework which can be used in dealing with any specific case assignment help

Thursday, June 2, 2011

Import Quotas Types defination

The system of import quotas may be classified into five major groups: (1) the tariff or custom quota (2)the unilateral quota, (3) the bilateral quota (4) the mixing quota and (5) import licensing.

The tariff quota

The tariff or custom quota is a widely acclaimed measure. Under this system, imports of a commodity upto a specified quantity are allowed to be imported duty-free or at a special low rate of duty. But imports in excess of this fixed limit are changed a higher rate of duty. The tariff quota thus combines the features of a tariff with those of quota flexibility is another advantage of this system.

However, the system has the following drawbacks:

(i) When imports tend to bemire than the fixed limit assigned under low duty rate the entire gains from the low rate are shared by the exporting country.and it is the part of the economics Homework help

(ii) It brings a rush of imports in the beginning of each new tariff quota, which may disturb domestic price levels of the importing country.

The unilateral quota

Under this system a county places an absolute limit on the importation of a commodity during a given period. It is imposed without prior negotiation with foreign governments.

The quota so fixed may be either global or allocated. Under a global quota, the commodity can be imported from any country upto the full amount of the quota under an allocated quota system; however, the total of the quota is distributed among specified supplying countries.

The bilateral quota

Under this system quotas are set through negotiation between the importing county and the exporting country (or foreign export groups) it has the following merits:

(i) Quotas are decided by mutual agreement.

(ii) It minimises the suspicion in imports;

(iii) It avoids excessive fluctuation in imports;

(iv) It excludes export monopolies by agreement

The mixing quota

It is type of regulation which requires producers to utilize a certain proportion of domestic raw materials along with imported parts to produce finished goods domestically. It thus sets limits on the proportion of foreign made raw materials to be (imported and) used in domestic production. In Brazil, for instance there is a stipulation that a certain percentage of bread weight must consist of domestic mandioca can find online tutoring