cly) Cyy) c(y=F+Cy(y) y
y $ Fcv (y) c(y) F c(y) = F + c v (y)
Av. Fixed Ay. Variable av. Total Cost curves The firm's total cost function is (y=F+Cy(y) For y>0, the firm's average total cost function is F. C(y) AC(y)=-+ AFC(y)+AvC(y)
Av. Fixed, Av. Variable & Av. Total Cost Curves The firm’s total cost function is For y > 0, the firm’s average total cost function is c(y) = F + cv (y). AC y F y c y y AFC y AVC y v ( ) ( ) ( ) ( ). = + = +
Av. Fixed Ay. Variable av. Total Cost curves What does an average fixed cost curve look like? F AFC(y) AFc(y)is a rectangular hy perbola so its graph looks like…
Av. Fixed, Av. Variable & Av. Total Cost Curves What does an average fixed cost curve look like? AFC(y) is a rectangular hyperbola so its graph looks like ... AFC y F y ( ) =
Output unit AFc(y)→>0asy→o AFc(y) 0 y
$/output unit AFC(y) 0 y AFC(y) → 0 as y →
Av. Fixed. Av. Variable av Total Cost Curves In a short-run with a fixed amount of at least one input, the Law of Diminishing Marginal Returns must apply, causing the firm's average variable cost of production to increase eventually
Av. Fixed, Av. Variable & Av. Total Cost Curves In a short-run with a fixed amount of at least one input, the Law of Diminishing (Marginal) Returns must apply, causing the firm’s average variable cost of production to increase eventually