AVERAGE COST

We complete our catalog of the cost concepts with a discussion of different kinds of a\’erage or unit co t, Table 7-3 expands the data of Tables 7-1 and 7-2 to include three new measures: average cost, average fixed c t, and average variable cost.

AVERAGE COST

AVERAGE COST

We can derive all the different cost concepts from the TC in column (4). Columns (5) and (Il) are the important ones to concentrate on: marginal cost is calculated by subtraction of adjacent rows of TC and is shown in blue. The starred MC of 40 at an output of 4 is the smoothed MC from Figure ‘-2(b). In column (6), note the point of minimum cost of $40 on the hipped A C curve in Fig. 7-2(b). (Can you see why the scarred MC equal the scarred A Cat the minimum? Also, calculate and fin in aU the missing number.)

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