Variable and Total cost curve 

 

* 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 

Posted Date: 10/12/2012 2:52:16 AM | Location : United States

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