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.

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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