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Sep 5, 2023 · Economics For Dummies. People have to make choices because of scarcity, the fact that they don’t have enough resources to satisfy all their wants. Economics studies how people allocate resources among alternative uses. Macroeconomics studies national economies, and microeconomics studies the behavior of individual people and individual firms.
- Sean Masaki Flynn
- Diagram of Marginal Cost
- Average Cost Curves
- Long Run Cost Curves
Because the short run marginal cost curve is sloped like this, mathematically the average cost curve will be U shaped. Initially, average costs fall. But, when marginal cost is above the average cost, then average cost starts to rise. Marginal cost always passes through the lowest point of the average cost curve.
ATC (Average Total Cost) = Total Cost / quantityAVC (Average Variable Cost) = Variable cost / QuantityAFC (Average Fixed Cost) = Fixed cost / QuantityThe long-run cost curves are u shaped for different reasons. It is due to economies of scale and diseconomies of scale. If a firm has high fixed costs, increasing output will lead to lower average costs. However, after a certain output, a firm may experience diseconomies of scale. This occurs where increased output leads to higher average costs. Fo...
The variable cost increases with output because extra output requires extra variable inputs. As we can see in the graph, the variable cost curve rises as output, [latex]Q[/latex], increases. The short-run variable cost curve is determined by and matches the shape of the short-run production function, which we studied in chapter 6. The short-run ...
- Patrick M. Emerson
- 2019
Mar 22, 2024 · A cost curve is a graphical representation that shows how the cost of producing goods changes with changes in the quantity of output produced. It essentially reflects the relationship between costs (on the vertical axis) and quantity (on the horizontal axis). There are several types of cost curves, each illustrating different aspects of ...
Mar 26, 2016 · To an economist, any short-run average total cost (SRATC) curve must be by definition less elastic — that is, less responsive to price — than a long-run average total cost (LRATC) curve. Therefore, in a diagram, a SRATC curve is steeper, reflecting the lower ability to adjust in the short run (as costs go up, output doesn't change as much as in the long run).
Mar 26, 2016 · Microeconomics For Dummies. Productive efficiency is satisfied when a firm can't possibly produce another unit of output without increasing proportionately more the quantity of inputs needed to produce that unit of output. It's met when the firm is producing at the minimum of the average cost curve, where marginal cost (MC) equals average total ...
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Feb 12, 2019 · There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. increasing in quantity). This simply reflects the fact that it costs more in total to produce more output. The total cost curve is generally bowed upwards. This isn't necessarily always the case- the total cost curve could be linear in ...
