ECON101 Lecture Notes - Lecture 16: Marginal Product, Marginal Cost, Variable Cost
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Why the average total cost curve is u-shaped. The atc curve is the vertical sum of the afc curve and the avc curve. The shapes of a firm"s cost curves are determined by the technology it uses. We"ll look first at the link between total cost and total product and then at the links between the average and marginal product and cost curves. Figure 10. 6 show s when output is plotted against labour, the curve is the tp curve. When output is plotted against variable cost, the curve is the tvc curve but it is flipped over. The shapes of a firm"s cost curves are determined by the technology it uses: Mc is at its minimum at the same output level at which mp is at its maximum. When mp is rising, mc is falling. Avc is at its minimum at the same output level at which ap is at its maximum. When ap is rising, avc is falling.