Variable and total cost curve , Microeconomics

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Variable and Total cost curve

174_short run cost.png

* Consequently (from the table which is given):

- MC initially decreases with increasing returns

0 through 4 units of output

- MC increases with the decreasing returns

5 through 11 units of output

* The line drawn from origin to tangent of variable cost curve:

- Its slope equals AVC

- The slope of point on VC equals MC

- Thus, MC = AVC at 7 units of output (point A)

* Unit Costs

- AFC continuously falls

- When MC < AVC or MC < ATC, AVC and ATC decrease

- When MC > AVC or MC > ATC, AVC & ATC increase

- MC = AVC and ATC at the minimum AVC and ATC

- Minimum AVC occurs at lower output than minimum ATC because of FC

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