Here we briefly talk about the theory of cost function. Discussion subject- 1.Short run & Long run 2.Total cost curve 3.Marginal cost curve 4.Short run cost of 4 different plant 5.Long run average cost curve 6.ISO cost curve 7.ISO Quant curve

1. GROUP-A+

2. TABLE OF
CONTENTS
Short run & Long run
Total cost curve
Marginal cost curve
Short run cost of 4 different plant
Long run average cost curve
ISO cost curve
ISO Quant curve

3. CLASSIFICATION
OF COST
Short run & Long
Short run Long run
Short run is a time frame in
which the quality of at least one
factor of production is fixed
the firm does not have sufficient
time to change the size of its
plant.Marginal cost curve
at least one input is fixed while
others are variable
Long run is a time frame in which
the quantities of all factors of
production can be varied
firms are able to adjust all costs
The firm has time to build a
bigger factory and respond to
changes in demand

4. Acurvethatgraphically
representstherelation
betweenthetotalcost
incurredbyafirminthe
short-runproductionofa
goodorserviceandthe
quantityproduced.Thetotal
costcurveisacornerstone
uponwhichtheanalysisof
short-runproductionisbuilt.
TOTAL COST
CURVE

5. SHORT RUN
AVERAGE
COST SURVE
In the beginning, both AVC and AFC curves
fall. Hence, the ATC curve falls as well.
Next, the AVC curve starts rising, but the AFC
curve is still falling. Hence, the ATC curve
continues to fall. This is because, during this
phase, the fall in the AFC curve is greater
than the rise in the AVC curve.
As the output rises further, the AVC curve
rises sharply. This offsets the fall in the AFC
curve. Hence, the ATC curve falls initially and
then rises

6. SHORT RUN
COST OF FOUR
DIFFERENT
PLANTS
The figure shows short run average total
cost curves for four different qualities of
capital.
Each short run ATC curve is U
shaped.Because as the quality of labour
increases,its marginal product initially
increases and then diminishes.The
minimum average total cost for a larger
plant occures at a a greater output than it
does for a smaller plant because the larger
plant has a higher total fixed cost and
therefore,for any given nput a higher
average fixed cost

7. LONG RUN
AVERAGE
COST CURVE
A long run average cost curve is known as a
planning curve. This is because a firm plans
to produce an output in the long run by
choosing a plant on the long run average
cost curve corresponding to the output. It
helps the firm decide the size of the plant
for producing the desired output at the
least possible cost.

8. ISO COST
An isocost show all combinations of
factors that cost the same amount.
An isoquant shows all combinations of
factors that produce a certain output
ISO QUANT

9. THANK
YOU
look forward to working
with you
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comilla
University,Bangladesh
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