12 Economic Costs (1)

# And 6 total costs vs average costs total costs look at

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Unformatted text preview: al Costs look at the costs at a particular Total output level. output Average Costs looks at the average amount of Average each type of cost over all of the output produced up to a certain production amount. produced 7 Marginal Cost Marginal Cost is the change in total cost that Marginal results from a one unit increase in output. results It is the cost of producing one extra unit of output. MC = TC = TC1 – TC2 Q Q1 - Q2 See how TC changes as output changes. Graphically, the MC curve intersects the AVC curve at its minimum… 8 Average and Marginal Cost Curves \$200 MC Costs 150 AFC ATC AVC 100 50 AVC AFC 0 1 2 3 4 5 6 7 8 9 10 Q 9 Numeric Example Example: Sam owns a Smoothie Shop Suppose Sam produces 5 gallons an hour at a cost of Suppose \$26.20 and produces 6 gallons of smoothies an hour at a total cost of \$28.00. total...
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