Title

(2) Short Run Cost II: Standard Cost Relations

Topic Category

Cost

Publication Date

2011

Keywords

Total Cost, Fixed Cost, Variable Cost, Average Variable Cost, Average Fixed Cost, Average Total Cost, Marginal Cost, Opportunity Cost, Economic Profits, Cost Curve Shapes

Abstract

This presents the short run cost relations, using both the totals and the average/marinal approaches. After a brief introduction, the concepts of Total Cost, Total Fixed Cost, and Total Variable Cost are introduced, including both linear and nonlinear graphical examples. Next, the same is done with Average Total Cost, Average Fixed Cost, Average Variable Cost, and Marginal Cost. The link between production and cost is reviewed next, with emphasis on the point that the shape of the production function determines the shape of the cost function.

Run Time

8:10

Primary Discipline

Microeconomics

Skills Delivered

Ability to explain and graph various short run cost functions. Ability to distinguish between linear and nonlinear versions of cost functions. Ability to explain how the shape of the production function determines the shape of the cost function.

Rigor Level

2000

Prerequisites

Production & Previous Short Run Cost Videos

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