Draw the various short run cost curves with the help of diagram
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Answer:
n the short run, capital is fixed. After a certain point, increasing extra workers leads to declining productivity. Therefore, as you employ more workers the marginal cost increases.
Diagram of Marginal Cost

Because the short run marginal cost curve is sloped like this, mathematically the average cost curve will be U shaped. Initially, average costs fall. But, when marginal cost is above the average cost, then average cost starts to rise.
Marginal cost always passes through the lowest point of the average cost curve.
Average Cost Curves

ATC (Average Total Cost) = Total Cost / quantity
AVC (Average Variable Cost) = Variable cost / Quantity
AFC (Average Fixed Cost) = Fixed cost / Quantity
Costs

Fixed costs (FC) remain constant. Therefore the more you produce, the lower the average fixed costs will be.
To work out the marginal cost, you just see how much TC has increased by.
For example, the third unit sees TC increase from 450 to 500, therefore, the increase in MC is 50.
The 12th unit sees total cost rise from 1,700 to 2,400, so the marginal cost is 700
Average fixed costs

Fixed, variable and total cost curves
Total cost (TC) = Variable cost (VC) + fixed costs (FC)
Long Run Cost Curves
The long-run cost curves are u shaped for different reasons. It is due to economies of scale and diseconomies of scale. If a firm has high fixed costs, increasing output will lead to lower average costs.

However, after a certain output, a firm may experience diseconomies of scale. This occurs where increased output leads to higher average costs. For example, in a big firm, it is more difficult to communicate and coordinate workers.
Diagram for Economies and Diseconomies of Scale

Note, however, not all firms will experience diseconomies of scale. It is possible the LRAC could just be downward sloping.

Related
Diagram of Monopoly
Diagram of Perfect competition
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25 thoughts on “Diagrams of Cost Curves”
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Peter L. Griffiths
27 August 2012 at 3:38 pm
Marginal fixed cost is the total fixed cost at one unit of output and is nil for all higher units of output. Average fixed cost is also the total fixed cost at one unit of output but declines in the form of a hyperbola for all higher units of output. Marginal variable costs are the same as average variable costs. Cost accountants have been quicker than economists to recognise this. The U shaped cost curve with its declining marginal curve is economically unrealistic as well as being superfluous. All these marginal and average curves can be shown on the same coordinates diagram.
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i got so many points while studying these diagram
19 November 2012 at 5:22 am
these diagram cleared all of my doubts in short run& in long run
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motion tshuma
9 May 2019 at 5:32 pm
yaaah simplified diagrams
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Henry Munyalo
24 November 2012 at 8:32 pm
I understood the Cost Curves better after reading this article .Keep up the good work ; From Kenya
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charles
13 December 2017 at 12:34 pm
kindly help with:
show how diminishing marginal physical product id related to the shape of short-run marginal and average cost curves
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john
23 June 2018 at 7:42 am
great and helpful…..but was confused on which diagram to use in answering my question….the section of a firms short-run marginal cost curve above the average cost curve is
Short Run Cost Curve # Average Fixed Cost (AFC):
Average fixed cost is the fixed cost per unit of output.
This is obtained by dividing the total fixed cost by the level of output:
AFC = TFC/Q, where Q = output
As output increases and TFC remains fixed, AFC declines continuously. As the same volume of fixed cost is divided by the – larger volume of output, AFC must decline. Further, the AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes. The AFC curve is asymptotic to both the axes. This means that it touches neither the horizontal axis nor the vertical axis.
It's in photo fig3.13...
Fig. 3.13 illustrates the derivation of AFC curve from the TFC curve. In Fig. 3.13(a), we have drawn TFC curve parallel to the output axis. Here the output OQ1, OQ2 and OQ3 have been measured in such a way that OQ1 = Q1Q2 = Q2Q3.
Since AFC = TFC/Q, AFC is given by the slope of a ray from the origin to a point on the TFC curve. We have chosen points A, B and C on the TFC curve and on all these points we have drawn rays OA, OB and OC.
Consider output OQ1. Corresponding to this output level, AFC is the slope of the ray OA, i.e., AFC = Q1A/OQ1. Similarly, for output OQ2, AFC = Q2B/OQ2and for output OQ2, AFC = Q3C/OQ3. As fixed costs do not change, one can say that Q1A = Q2B = Q3C.
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