This document discusses short-run and long-run cost curves. It defines total, fixed, variable, average, and marginal costs for short-run cost functions. It then explains that the long-run average cost curve shows the minimum average cost for different output levels using different plant sizes. Finally, it discusses the relationship between long-run and short-run average cost curves, and how internal and external economies and diseconomies of scale can impact costs.

1. Cost

2. Short-Run Cost Functions Total Cost = TC = f(Q) Total Fixed Cost = TFC Total Variable Cost = TVC TC = TFC + TVC

3. Short-Run Cost Functions Average Total Cost = ATC = TC/Q Average Fixed Cost = AFC = TFC/Q Average Variable Cost = AVC = TVC/Q ATC = AFC + AVC Marginal Cost =  TC/  Q =  TVC/  Q

4. Short-Run Cost Functions

6. Long-Run Cost Curves The Long-run Average Cost (LAC) curve is the cost curve showing the average cost of production at different levels of output, turned out by different sized plants.

7. Long-Run Cost Curves Long-Run Total Cost = LTC = f(Q) Long-Run Average Cost = LAC = LTC/Q Long-Run Marginal Cost = LMC =  LTC/  Q

8. Relationship Between Long-Run and Short-Run Average Cost Curves