Cost Curves

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Cost Curves

• Average Costs
• Marginal Costs
• Long run and Short Run

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Cost Function

• In our example, the short-run cost function
  was
• Variable costs
  Fixed costs

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Cost Curve
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Average Cost Function

• The short run average cost function
• Average variable cost Average fixed cost

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Average Fixed Cost Curve
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Average Variable Cost Curve
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Why is AVC Increasing in y?

• Production function and AVC
• Productions function features decreasing returns
  to scale wrt

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Average Cost Curve
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Marginal Cost Function

• The short run cost function
• The short run marginal cost function

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Marginal and Average Variable Cost Curves
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Marginal and Average Cost Curves
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Variable Costs and the Marginal Cost Curve
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Long Run

• In the long run there are no fixed factors of
  production
• Firm can freely adjust inputs
• Production costs are lower in the long run

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Long and Short Run Cost Curves
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Long and Short Run Average Cost Curves
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Long and Short Run Marginal Cost Curves
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Long and Short Run Cost Functions