costs
DESCRIPTION
Costs. Short-run costs. Total cost. Total costs for firm X. Output (Q) 0 1 2 3 4 5 6 7. TFC (£) 12 12 12 12 12 12 12 12. Total costs for firm X. Output (Q) 0 1 2 3 4 5 6 7. TFC (£) 12 12 12 12 12 12 12 12. TFC. Total costs for firm X. Output (Q) 0 - PowerPoint PPT PresentationTRANSCRIPT
Costs
Short-run costs
Total cost
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
Output(Q)
01234567
TFC(£)
1212121212121212
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TFC
Output(Q)
01234567
TFC(£)
1212121212121212
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TFC
Output(Q)
01234567
TFC(£)
1212121212121212
TVC(£)
010162128406091
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TVC
Output(Q)
01234567
TFC(£)
1212121212121212
TVC(£)
010162128406091
TFC
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TVC
TFC
Diminishing marginalreturns set in here
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TVC
Output(Q)
01234567
TFC(£)
1212121212121212
TVC(£)
010162128406091
TFC
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TVC
TFC
Output(Q)
01234567
TFC(£)
1212121212121212
TVC(£)
010162128406091
TC(£)
12222833405272
103
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TCOutput
(Q)
01234567
TFC(£)
1212121212121212
TVC(£)
010162128406091
TC(£)
12222833405272
103
TVC
TFC
Total costs for firm X
0
20
40
60
80
100
0 1 2 3 4 5 6 7 8
TC
TVC
TFC
Diminishing marginalreturns set in here
Total costs for firm X
Short-run costs
Marginal cost= TC / Q
0
20
40
60
80
100
120
0 1 2 3 4 5 6 7
Deriving marginal costs
Q TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
Costs (£)
TC
0
20
40
60
80
100
120
0 1 2 3 4 5 6 7
Deriving marginal costs
Q TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
Costs (£)
0
20
40
60
80
100
120
0 1 2 3 4 5 6 7
Q TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
TC
TC = 12
Q = 1
Costs (£) Deriving marginal costs
TC
0
20
40
60
80
100
120
0 1 2 3 4 5 6 7
MCDiminishingreturns set
in here
Costs (£) Deriving marginal costs
Q TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
MC
Costs (£) Deriving marginal costs
Diminishing marginalreturns set in here
Short-run costs
Average cost=TC / Q
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7QQ
Costs (£)
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TVC AVC0 0 -1 10 102 16 83 21 74 28 75 40 86 60 107 91 13
Costs (£)
AFC
3
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TVC AVC0 0 -1 10 102 16 83 21 74 28 75 40 86 60 107 91 13
Costs (£)
AFC
AVC
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TC AC0 12 1 22 222 28 143 33 114 40 105 52 10.46 72 127 103 14.7
Costs (£)
AFC
AVC
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TC AC0 12 1 22 222 28 143 33 114 40 105 52 10.46 72 127 103 14.7
Costs (£)
AC
AFC
AVC
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
Costs (£)
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
MCQ TC MC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
Costs (£)
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TC MC AC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
MC -2214111010.41214.7
Costs (£)
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7
Q TC MC AC0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103
10 6 5 7122031
MC -2214111010.41214.7
Costs (£)
AC
Output (Q)
Cos
ts (£
)
AFC
AVC
MC
x
AC
z
y
Average and marginal costs
Long-run costs
Long-run costs=TC / Q
Alternative long-run average cost curves
OutputO
Cos
ts
LRAC
Economies of Scale
OutputO
Cos
ts
LRACDiseconomies of Scale
Alternative long-run average cost curves
OutputO
Cos
ts
LRAC
Constant costs
Alternative long-run average cost curves
A typical long-run average cost curve
OutputO
Cos
ts
LRAC
OutputO
Cos
ts
LRACEconomiesof scale
Constantcosts
Diseconomiesof scale
A typical long-run average cost curve
Long-run average and marginal costs
OutputO
Cos
ts
LRACLRMC
Economies of Scale
OutputO
Cos
ts
LRAC
LRMC
Diseconomies of Scale
Long-run average and marginal costs
OutputO
Cos
ts
LRAC = LRMC
Constant costs
Long-run average and marginal costs
OutputO
Cos
ts
LRMC
LRAC
Initial economies of scale,then diseconomies of scale
Long-run average and marginal costs
Long-run costs
Relationship between short-run and long-run
AC curves
Deriving long-run average cost curves: factories of fixed size
SRAC3
Cos
ts
OutputO
SRAC4
SRAC5
5 factories4 factories3 factories
2 factories1 factory
SRAC1 SRAC2
SRAC1
SRAC3
SRAC2 SRAC4
SRAC5
LRAC
Cos
ts
OutputO
Deriving long-run average cost curves: factories of fixed size
Cos
ts
OutputO
Examples of short-runaverage cost curves
Deriving long-run average cost curves: choice of factory size
LRAC
Cos
ts
OutputO
Deriving long-run average cost curves: choice of factory size