Behind the Supply Curve: Input and costs - Two key concepts: Marginal Cost and Average Cost
3 important questions on Behind the Supply Curve: Input and costs - Two key concepts: Marginal Cost and Average Cost
What are the two measures that are important when taking a closer look at the Total cost curve?
- Marginal cost
- Average total cost
What does economists believe about the marginal cost curve? What is the name for this graph?
- The increases specialization initially leads to lower marginal cost, so the initial specialization leads to increasing returns which means that additional workers produce more, and marginal cost slopes downwards. (less costs)
- However, diminish returns set in once the benefits from specialization are exhausted and marginal cost rises, and the MC curve slopes upwards. (higher costs)
- the swoosh shaped graph
How does the average variable cost look (strictly)
It is more U shaped rather than upward sloping
(not upward sloping)
(not upward sloping)
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