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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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 Spring '14

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