Answer to Question #246017 in Economics of Enterprise for Zinhle

Question

Discuss the relationship between the three short-run total cost curves. Use a
diagram to motivate your answer

Answer 1

Three short-run total cost curves include the following curves;

Average Total Cost (ATC) curve.

Average Variable Cost (AVC) curve.

Average Fixed Cost (AFC) curve.

 

We get Average total cost from the sum of the Average Variable cost and the Average Fixed costs.

Which is, $ATC = AFC + AVC$

The appearance of the ATC curve is influenced by the AVC and AFC curves.

For instance if at the beginning both the AVC and AFC curves are falling the ATC curve will fall also

This is displayed by the below graph: