Production Cost in the Short-Run

Production Cost in the Short-Run:

The function TC = TC(w, r, Q) simplifies to TC = TC(Q)

TC = TFC + TVC = Q⋅ AC = Q(AFC + AVC)

AC= TC/Q = TFC/Q + TVC/Q = AFC + AVC

MC = ΔTC/ΔQ = ΔTFC/ΔQ + ΔTVC/ ΔQ = MFC + MVC = MVC

Marginal Cost in SR is Marginal Variable Cost (as MFC = 0)

1956_production cost in short run.jpg

TC(Q) = F +VC(Q) . The necessary condition of minimum AVC (at point C) is:

2166_derrivation of marginal variable cost.jpg

Likewise, can you prove the condition at point D?

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