David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

CHAPTER 7 Costs and supply
Table 7.3
Short-run overage costs of production
SAFC Short-run SAVC Short-run
Output average fixed cost average variable cost
1 30.00 22.00
2 15.00 19.00
3 10.00 16.00
4 7.50 15.25
5 6.00 15.80
- --
6 5.00 17.00
7
--
4.29 18.71
8 3.75 20.75
9 3.33 23.00
10 3.00 25.50
SATC Short-run
average total cost
52.00
34.00
26.00
22.75
21.80
22.00
23.00
24.50
26.33
28.50
SMC Short-run
marginal cost
22
16
10
13
18
23
29
35
41
48
-
-
On the relationship between short-run marginal and average costs
In Figure 7.6 we plot the short-run marginal and average costs. Two facts stand out from this figure:
SATC is falling when SMC is less than SATC, while it is rising when SMC is greater than SATC. The
same applies for the relationship between SMC and SAVC.
2 SATC is at a minimum at the output at which the LMC curve and the SATC curve cross (point A in
Figure 7.6). The SAVC is at its minimum at the
output at which the LMC curve and the SAVC
60 curve cross (point Bin Figure 7.6).
50
40
:? 30
Ill
0
u
20
10
Figure 7.5
SATC
SAFC
2 3 4 5 6 7 8 9 10
Output (goods per week)
Short-run average cost curves
Neither fact is an accident. The relationship
between average and marginal is a matter of
arithmetic, as relevant for football as for
production costs. A footballer with 3 goals in 3
games averages l goal per game. Two goals in the
next game, implying 5 goals from 4 games, raise
the average to 1.25 goals a game. In the fourth
game, the marginal goals were 2, raising total
goals from 3 to 5. Because the marginal score
exceeds the average score in previous games, the
extra game must drag up the average.
The same holds for production costs. When the
marginal cost of the next unit exceeds the average
cost of the existing units, making the next unit
must raise average cost. If the marginal cost of
the next unit lies below the average cost of
existing units, an extra unit of production drags
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