Let us make an in-depth study of the shapes of various short run cost curves. 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 [...]
It should be noted that average and marginal costs are related together. This relationship should be carefully understood. When the average cost is falling, the marginal cost is less than the average cost and when average cost is rising, the marginal cost is higher than the average cost. But if marginal cost neither goes up nor comes down, the average [...]
Meaning of Short-run and Long-run: In Economics, distinction is often made between the short-run and long-run. By short-run is meant that period of time within which a firm can vary its output by varying only the amount of variable factors, such as labour and raw material. In the short-run period, the fixed factors such as capital equipment, management personnel, the [...]