12 Economic Costs (1)

And 6 total costs vs average costs total costs look at

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

Ask a homework question - tutors are online