Production Cost

Characteristics of the shape of MP, AP and TP curves

MP curve passes through the maximum point of AP curve

Find MP and AP from TP

Characteristics of MC, ATC, AVC, TVC, TFC, TC and AFC curves

                -MC increases as MP decreases

                -U - shaped MC curve due to LDMP

SRAC : U-shaped because of law of diminishing returns

LRAC : U-shaped because of economies of scale ( increasing returns to scale ) and diseconomies of scale

Production efficiency : equality of MCs of all firms producing the same good

Alchain’s interpretation of cost curves