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In economics, 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 optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve.
The additional total cost of one additional unit of production is called marginal cost. The marginal cost can also be calculated by finding the derivative of total cost or variable cost. Either of these derivatives work because the total cost includes variable cost and fixed cost, but fixed cost is a constant with a derivative of 0.
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
In economics, average cost (AC) or unit cost is equal to total cost (TC) divided by the number of units of a good produced (the output Q): A C = T C Q . {\displaystyle AC={\frac {TC}{Q}}.} Average cost is an important factor in determining how businesses will choose to price their products.
Each line segment is an isocost line representing one particular level of total input costs, denoted TC in the graph and C in the article's text. P L is the unit price of labor (w in the text) and P K is the unit price of physical capital (r in the text). In economics, an isocost line shows all combinations of inputs which cost the same total ...
In economics, a cost function represents the minimum cost of producing a quantity of some good. The long-run cost curve is a cost function that models this minimum cost over time, meaning inputs are not fixed. Using the long-run cost curve, firms can scale their means of production to reduce the costs of producing the good. [1]
The unit cost is the price incurred by a company to produce, store and sell one unit of a particular product. Unit costs include all fixed costs and all variable costs involved in production. Cost unit is a form of measurement of volume of production or service.
Average fixed cost is the fixed cost per unit of output. As the total number of units of the good produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output. Average variable cost plus average fixed cost equals average total cost: