NTA-NET (UGC-NET) Economics & Development (01) Micro-Economic Analysis-Theory of Production and Costs Study Material (Page 1 of 8)

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Short Run Costs

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Short Run Costs

In the short run, there are 2 type of cost methods:

1. Fined costs

2. Variable costs

Fixed Costs

Fixed costs are not which remain the same irrespective of the level of output they include:

  1. Salary of staff
  2. Expenditure on land, machinery etc.

Variable Costs

Variable costs are cost which vary with the level of output. When the level of output is zero, the variables cost are zero.

  1. Cost of law material
  2. Wages of labour
  3. Running expenses of running a firm e…

… (122 more equations, 23 figures) …

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Relation between ATC and AVC

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Relation between ATC and AVC

  • The average variable cost (AVC) is the total variable cost per unit of output. This is found by dividing total variable cost (TVC) by total output (Q) . Total variable cost (TVC) is all the costs that vary with output, such as materials and labor. The easiest way to determine if a cost is variable is if the output changes, the cost changes as well.
  • AVC Function shows the average variable cost function. it՚s a U-shaped curve. Initially, the variable cost per unit of output decreases as output increases. At one point, it reaches a low. After the low, the vari…

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