Ch. 10 - The Costs of ProductionWorksheetSee all chapters

# The Relationship Between Average Cost and Marginal Cost

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Sections
Revenue, Cost, and Profit
The Production Function and Diminishing Returns
Marginal Cost
The Relationship Between Average Cost and Marginal Cost
Graphing Costs
Average Total Cost: Short Run and Long Run
Isoquant Lines
Isocost Lines
Cost-Minimizing Combination of Labor and Capital
###### If marginal cost is above average cost, it will drive the average cost up. If marginal cost is below average cost, it will drive the average cost down.

Concept #1: Average Cost and Marginal Cost

Concept #2: Patterns of MC, AFC, AVC, and ATC curves

Practice: A firm is currently producing 100 units with an average total cost of $44 and a marginal cost of$32. If it were to increase production to 101 units, which of the following must be true?

Practice: The government imposes a $10,000 per year inspection fee on all restaurants. Which cost curves are affected? Practice: A firm is producing 1,500 units at a total cost of$15,000. If it were to increase production to 1,501 units, its total cost would rise to \$15,012. Which of the following is true?