Principles of Microeconomics / Unit 6 MIC 0520 short lesson, about 20 seconds
The Shape of Average Cost
Captions available
The idea
Average total cost falls at first, as fixed cost spreads over more units, then rises as diminishing returns raise each extra unit's cost: a U.
In practice
The bakery's average total cost runs eight, four forty, four, four twenty-five and four seventy-one.
Where people slip
Average variable cost is a U too, from diminishing returns alone, and bottoms out before average total cost.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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