Fixed and Variable Costs


Average Fixed Cost, Average Variable Cost, and Average Total Cost


Exercise on Calculating costs

Check your answers here: Solution to the Exercise on Calculating costs

Why ATC Is Usually U-Shaped

As Q increases: in the beginning, AFC decreases which pulls down ATC. Then as Q keeps increasing, AVC rises as well as ATC. Hence, to be efficient, we need to find Q that minimizes ATC. atc-u-shaped.jpg

ATC and MC

When MC < ATC, ATC decreases. But when MC > ATC, ATC rises. The MC curve crosses the ATC curve at the ATC curve's minimum. atc-mc.jpg

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Date of last modification: 2019