Cost Curves Average Costs Marginal Costs Long run and Short Run.

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Presentation transcript:

Cost Curves Average Costs Marginal Costs Long run and Short Run

Cost Function In our example, the short-run cost function was: Variable costs Fixed costs

Cost Curve

Average Cost Function The short run average cost function: Average variable cost Average fixed cost

Average Fixed Cost Curve

Average Variable Cost Curve

Why is AVC Increasing in y? Production function and AVC: Productions function features decreasing returns to scale wrt

Average Cost Curve

Marginal Cost Function The short run cost function: The short run marginal cost function:

Marginal and Average Variable Cost Curves

Marginal and Average Cost Curves

Variable Costs and the Marginal Cost Curve

Long Run In the long run there are no fixed factors of production Firm can freely adjust inputs Production costs are lower in the long run

Long and Short Run Cost Curves

Long and Short Run Average Cost Curves

Long and Short Run Marginal Cost Curves

Long and Short Run Cost Functions

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