Summarized from Greg Mankiw’s Principles of Economics PART V Firm Behavior and the Organization of Industry Chapter 13 of 36 – The Costs of Production, section 13 Table 2 here again Figure 4 here Figure 4 - Conrads Coffee Shop Cost Curves These cost curves are created by graphing data from Table 2. This figure shows the shop’s • Average Total Cost (ATC) • Average Fixed Cost (AFC) • Average Variable Cost (AVC) • Marginal Cost (MC) These cost curves show three features typical of many firms • Marginal Cost (MC) rises with the quantity of output • Average Total Cost (ATC) curve is U-shaped • Marginal Cost (MC) curve crosses the Average Total Cost (ATC) curve at the ATC minimum … Graphs of average and marginal cost useful when analyzing the behavior of firms. Figure 4 is a graph of Conrads costs using Table 2 data. • the horizontal axis measures the quantity of output the firm produces • the vertical axis measures costs The graph shows four curves • Average Total Cost (ATC) • Average Fixed Cost (AFC) • Average Variable Cost (AVC) • Marginal Cost (MC) We’ll examine three main features • the shape of the Marginal Cost (MC) curve • the shape of the Average Total Cost (ATC) curve • the relationship between Marginal Cost (MC) and Average Total Cost (ATC)
Posted on: Sat, 22 Mar 2014 12:38:02 +0000
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