What is the term for the rising portion of its marginal cost curve above its average variable cost curve? What is the term for the extra revenue derived from the sale of one more unit? What is the term for the price at which the firm makes only "normal" profits?
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Cost curves are graphical representations of the relationship between the quantity of output produced and the costs of production. There are three main types of cost curves:
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Total cost curve (TC): This curve shows the total cost of producing a certain quantity of output. It is upward sloping because as output increases, total costs also increase.
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Marginal cost curve (MC): This curve shows the additional cost of producing one more unit of output. It is upward sloping and intersects the average variable cost curve and the average total cost curve at their minimum points.
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Average cost curves: a) Average total cost curve (ATC): This curve shows the average cost per unit of output, including both fixed and variable costs. It is U-shaped and intersects the marginal cost curve at its minimum point. b) Average variable cost curve (AVC): This curve shows the variable cost per unit of output. It is also U-shaped and intersects the marginal cost curve at its minimum point. c) Average fixed cost curve (AFC): This curve shows the fixed cost per unit of output. It decreases as output increases because fixed costs are spread over a larger quantity of output.
These cost curves are essential tools for firms to make decisions about production levels, pricing, and profitability. By analyzing the shape and position of the curves, firms can determine the most efficient level of output and minimize their costs.
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