13 What&acirc;€™s Behind the Supply Curve

# 13 What&acirc;€™s Behind the Supply Curve - Whats...

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What’s Behind the Supply Curve: Cost Curves, LR Cost and Scale 2/17/11 11:59 PM Prod’n & Costs in the Short Run (given Technology)

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green part of table- production; yellow- costs
TC curve lies absolutely parallel to variable cost curve, adds 1000 onto the curve Blue- marginal cost

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Marginal Cost Graph on slide 9 Recall, MC is the change in total cost from producing one more unit. Usually, MC rises as Q rises, due to diminishing marginal product. Sometimes (as here), MC falls before rising. Average Fixed Cost Graph on slide 10 AFC is fixed cost divided by the quantity of output: AFC=FC/Q Notice that AFC falls as Q rises: spreading effect: firm is spreading its fixed costs over a larger and larger number of units Average Variable Cost Graph on slide 11 AFC is a fixed variable cost divided by the quantity of output: AVC=VC/Q As Q rises, AVC may fall initially. In most cases, AVC will eventually rise as output rises.
Average Total Cost

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