Economics Cost Of Production Questions
In economics, there are four main cost curves:
1. Total Cost (TC) Curve: This curve represents the total cost incurred by a firm to produce a given quantity of output. It shows the relationship between the total cost and the level of production.
2. Average Total Cost (ATC) Curve: This curve represents the average cost per unit of output. It is obtained by dividing the total cost by the quantity of output produced. The ATC curve is U-shaped, reflecting the economies of scale at low levels of production and diseconomies of scale at high levels of production.
3. Average Variable Cost (AVC) Curve: This curve represents the average variable cost per unit of output. It is obtained by dividing the total variable cost by the quantity of output produced. The AVC curve is also U-shaped, but it lies below the ATC curve as it does not include fixed costs.
4. Marginal Cost (MC) Curve: This curve represents the additional cost incurred by producing one more unit of output. It is obtained by calculating the change in total cost divided by the change in quantity of output. The MC curve intersects the AVC and ATC curves at their minimum points.