Cost Analysis in the Long Run ( Period)

The long Period The long period is defined as the period that is long enough for the inputs of all factors of production to be varied. In this period no factor is fixed, all are variable factors. Firm has enough time to change its scale of production. It can purchase and install new machinery or […]

Relationship between Average Cost and Marginal Cost

There is a direct relationship between AC and MC curves. When AC falls MC also falls and is below AC. When AC is rising, MC also rises and is above AC. When AC is at its minimum MC equals it. It is easier to understand the relationship with the help of Fig. This fig shows […]

Relation between AC & MC

Average Cost is simply the total cost (TC) divided by the number of units produced (Q) or it is per unit cost. On the other, marginal cost is defined as the increment to total cost that comes from producing an increment of one unit output. The relationship between AC and MC is illustrated in the […]