Cost Curve - Relationship Between Different Curves

Relationship Between Different Curves

  • Total Cost = Fixed Costs (FC) + Variable Costs (VC)
  • Marginal Cost (MC) = dC/dQ; MC equals the slope of the total cost function and of the variable cost function
  • Average Total Cost (ATC) = Total Cost/Q
  • Average Fixed Cost (AFC) = FC/Q
  • Average Variable Cost = VC/Q.
  • ATC = AFC + AVC
  • The MC curve is related to the shape of the ATC and AVC curves:
    • At a level of Q at which the MC curve is above the average total cost or average variable cost curve, the latter curve is rising.
    • If MC is below average total cost or average variable cost, then the latter curve is falling.
    • If MC equals average total cost, then average total cost is at its minimum value.
    • If MC equals average variable cost, then average variable cost is at its minimum value.

Read more about this topic:  Cost Curve

Famous quotes containing the words relationship between, relationship and/or curves:

    “It would be a fallacy to deduce that the slow writer necessarily comes up with superior work. There seems to be scant relationship between prolificness and quality.”
    —Fannie Hurst (1889–1968)

    “Sisters is probably the most competitive relationship within the family, but once the sisters are grown, it becomes the strongest relationship.”
    —Margaret Mead (1901–1978)

    “For a hundred and fifty years, in the pasture of dead horses,
    roots of pine trees pushed through the pale curves of your ribs,
    yellow blossoms flourished above you in autumn, and in winter
    frost heaved your bones in the ground—old toilers, soil makers:
    O Roger, Mackerel, Riley, Ned, Nellie, Chester, Lady Ghost.”
    —Donald Hall (b. 1928)