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Variable and Total cost curve
* Consequently (from the table which is given):
- MC initially decreases with increasing returns
- MC increases with the decreasing returns
* 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
definition
f(x1 x2,x3,x4) =min(x1/4x22/3,x3+2x4)
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