Chapter21 - 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

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
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 ) = AV C ( y ) + AFC ( y ) (d) see ±gure 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 AV C at zero units of output goes through minimum point of AC and AV C (see ±gure 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 ) = i y 0 c ( t ) dt geometrically: the area under the marginal cost curve gives the total variable costs (see ±gure 21.3. in the textbook) intuitively: the maginal cost curve measures the cost of each additional unit, so adding up the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

This note was uploaded on 12/09/2010 for the course ECON 206 taught by Professor Ioanadan during the Summer '10 term at University of Toronto- Toronto.

Page1 / 2

Chapter21 - 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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online