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# Chapter21 - MC s gives the variable cost 2 Example c y = y...

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Chapter 21 - Cost Curves 1. Family of cost curves (a) total cost: c ( y ) = c v ( y ) + F (b) average cost: cost per unit of output c ( y ) y = c v ( y ) y + F y (c) AC ( y ) = AVC ( y ) + AFC ( y ) (d) see figure 20.1. in the textbook (e) marginal cost is the change in cost due to change in output c ( y ) = dc ( y ) /dy = dc v ( y ) /dy marginal cost equals AVC at zero units of output goes through minimum point of AC and AVC (see figure 21.2. in the textbook) d dy c ( y ) y = yc ( y ) c ( y ) y 2 this is negative (for example) when c ( y ) <c ( y ) /y fundamental theorem of calculus implies that c v ( y ) = integraltext y 0 c ( t ) dt geometrically: the area under the marginal cost curve gives the total variable costs (see figure 21.3. in the textbook) intuitively: the maginal cost curve measures the cost of each additional unit, so adding up the

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Unformatted text preview: MC s gives the variable cost 2. Example: c ( y ) = y 2 + 1 (a) c v ( y ) = y 2 (b) F = 1 (c) AC = y + 1 /y (d) AV C = y (e) AFC = 1 /y (f) MC = 2 y (g) see ±gure 21.4. in the textbook 3. Example: marginal cost curve for two plants - optimal division of output between the two plants must have the marginal cost of producing output at plant 1 equal to the marginal cost of producing output at plant 2. 4. Long-run cost from short-run cost (see ±gure 21.7. in the textbook) 1 (a) average costs - see fgures 21.8. and 21.9. in the textbook (b) marginal costs - see fgures 21.10. and 21.11 in the textbook 2...
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