Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

148 COSTS OF PRODUCTION [CHAP. 7
7.3 THE GEOMETRY OF SHORT-RUN PER-UNIT COST CURVES
Short-run per-unit cost curves can be derived geometrically from the corresponding short-run total cost
curves in exactly the same way as the AP L , and the MP L curves were derived (in Chapter 6) from the TP
curve. Thus, the AFC for any level of output is given by the slope of the straight line from the origin to the
corresponding point on the TFC curve. AVC is given by the slope of the line from the origin to various
points on the TVC curve. Similarly, AC is given by the slope of the line from the origin to various points
on the TC curve. On the other hand, the MC at any level of output is given by the slope of either the TC
curve or the TVC curve at that level of output.
EXAMPLE 3. In the panels of Fig. 7-3(a) and (b), we see how the AFC, AVC, AC, and MC curves of Fig. 7-2 are derived
geometrically from the TFC, TVC, and TC curves of Fig. 7-1.
In panel A of Fig. 7-3(a), the AFC at one unit of output is given by the slope of line OE. This equals TFC/1 ¼ $60/
1 ¼ $60 and is plotted as point E 0 on the AFC curve, Point F 0 on the AFC curve is given by the slope of OF which equals
$60/3 ¼ $20. Other points on the AFC curve can be similarly obtained. Note that as output expands, the slope of the line
from the origin to the TFC curve (which equals AFC) declines continuously.
In panel B, the AVC at two and six units of output is given by the slope of line OH or OM, which is $20. This gives
points H 0 and M 0 on the AVC curve. Note that the slope of a line from the origin to the TVC curve declines up to point J and
then rises. So the AVC curve falls until point J 0 and then rises.
Fig. 7-3(a)