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Average Variable, Total, Marginal and Fixed Costs

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Describe the relationships among average fixed costs, average variable costs, average total costs, and marginal costs. It is ok for each team to provide an example graph. Finally, describe the shut down point and when a firm might find it necessary to temporarily shut down operations.

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Answers the question:

Describe the relationships among average fixed costs, average variable costs, average total costs, and marginal costs. It is ok for each team to provide an example graph. Finally, describe the shut down point and when a firm might find it necessary to temporarily shut down operations.

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Hope this helps. Cheers, Cecilia

One more thing I forgot to say. The firm should stop producing if the price is below the average variable cost curve because that means that for every unit you produce, you are spending more in raw materials than you are getting back in revenues.

Describe the relationships among average fixed costs, average variable costs, average total costs, and marginal costs. It is ok for each team to provide an example graph. Finally, describe the shut down point and when a firm might find it necessary to temporarily shut down operations.

First, let's use the following acronyms:
Fixed Costs = FC
Average Variable Costs = AVC
Average Total Costs = ATC
Marginal Cost = MC

Short definitions:

Fixed Costs are costs that are not unit-dependent. That is, they do not vary with the number of units produced. These include such things as rent. Salaries can be fixed costs if you ...

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