A cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms use these curves to find the optimal point of production, where they make the most profits. There are a few different types of cost curves, each relevant to a different area of economics. Economics is the social science studying production and consumption through measurable variables. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... Profit is defined as the residual value gained from business operations. ... Economics (deriving from the Greek words οίκω [oikos], house, and νέμω [nemo], rules hence household management) is the social science that studies the allocation of scarce resources to satisfy unlimited wants. ...

Average Total Cost curve (ATC)

The average total cost curve is constructed to capture the relation between average total cost and the level of output, ceteris paribus. A productively efficient firm organises its factors of production in such a way that the average cost of production is at lowest point. In the short run, when at least one factor of production is fixed, this occurs at the optimum capacity where it has enjoyed all the possible benefits of specialisation and no further opportunities for increasing returns exist. This is at the minimum point in the diagram on the right.
Information processing In information processing, output is the process of transmitting information (verb usage). ... Ceteris paribus is a Latin phrase, literally translated as other things the same, and usually rendered in English as all other things being equal. ... Classical economics distinguishes between three factors of production which are used in the production of goods: Land or natural resources - naturally-occurring goods such as soil and minerals. ... Marginal cost is a term in economics. ... Concept B is a specialization of concept A if and only if: every instance of concept B is also an instance of concept A; and there are instances of concept A which are not instances of concept B. For instance, Bird is a specialization of Animal because every bird is...

Long-Run Average Cost curve (LRAC)

The long-run average cost curve depicts the per unit cost of producing a good or service in the long run when all inputs are variable. The curve is created as an envelope of an infinite number of short-run average total cost curves. The envelope is based on the point of each short-run ATC curve that provides the lowest possible average cost for each quantity of output. The LRAC curve is U-shaped, reflecting economies of scale when negatively-sloped and diseconomies of scale when positively sloped. In the long run, when all factors of production can be changed, the scale of the enterprise can be increased. In this, case productive efficiency occurs at the optimum scale of output where all the possible economies of scale have been enjoyed and the firm is not large enough to experience diseconomies of scale. This occurs at output level Q2 in the diagram.
The long run average cost (LRAC or LAC) curve illustrates - for a given quantity of production - the average cost per unit which a firm faces in the long run (i. ... In computer science and mathematics, a variable is a symbol denoting a quantity or symbolic representation. ... Infinity is a word carrying a number of different meanings in mathematics, philosophy, theology and everyday life. ... ... In economics, returns to scale describe the relationship between the size of a firm (or a production unit) and its long run average costs per unit. ...

Marginal Cost curve (MC)

A marginal cost that graphically represents the relation between marginal cost incurred by a firm in the short-run product of a good or service and the quantity of output produced. This curve is constructed to capture the relation between marginal cost and the level of output, holding other variables, like technology and resource prices, constant. The marginal cost curve is U-shaped. Marginal cost is relatively high at small quantities of output, then as production increases, declines, reaches a minimum value, then rises. This shape of the marginal cost curve is directly attributable to increasing, then decreasing marginal returns (and the law of diminishing marginal returns).
In economics and finance, marginal cost is the cost of increasing the quantity produced (or purchased) by one unit. ...

Combining cost curves

We can combine cost curves to provide information about firms. In this diagram for example, we are assuming that the firm is in a perfectly competitive market. The MC curve will cross the lowest point of the ATC curve, which is also where MC crosses MR. The firm will produce it's good at this point to achieve the maximum profit. Perfect competition is a model in economic theory. ...