How Do Cost Curves Shift?

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Presentation transcript:

How Do Cost Curves Shift? DO NOW: What can cause A firm’s costs to change?

What if Fixed Costs increase to $200 Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 10 110 2 16 116 6 8 50 58 3 21 121 5 7 33.3 30.3 4 26 126 6.5 25 31.5 30 130 20 36 136 16.67 22.67 46 146 6.6 14.3 20.9 What if Fixed Costs increase to $200

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 10 110 2 16 100 - 1 10 110 2 16 116 6 8 50 58 3 21 121 5 7 33.3 30.3 4 26 126 6.5 25 31.5 30 130 20 36 136 16.67 22.67 46 146 6.6 14.3 20.9

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 200 100 - 1 10 110 2 200 100 - 1 10 110 2 16 116 6 8 50 58 3 21 121 5 7 33.3 30.3 4 26 126 6.5 25 31.5 30 130 20 36 136 16.67 22.67 46 146 6.6 14.3 20.9

Which Per Unit Cost Curves Change? Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 200 - 1 10 210 100 110 2 16 216 6 8 50 58 3 21 221 5 7 33.3 30.3 4 26 226 6.5 25 31.5 30 230 20 36 236 16.67 22.67 46 246 6.6 14.3 20.9 Which Per Unit Cost Curves Change?

ONLY AFC and ATC Increase! Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 200 - 1 10 210 100 110 2 16 216 6 8 50 58 3 21 221 5 7 33.3 30.3 4 26 226 6.5 25 31.5 30 230 20 36 236 16.67 22.67 46 246 6.6 14.3 20.9 ONLY AFC and ATC Increase!

ONLY AFC and ATC Increase! Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 200 - 1 10 210 110 2 16 216 6 8 100 58 3 21 221 5 7 66.6 30.3 4 26 226 6.5 50 31.5 30 230 40 36 236 33.3 22.67 46 246 6.6 28.6 20.9 ONLY AFC and ATC Increase!

If fixed costs change ONLY AFC and ATC Change! Shifting Costs Curves If fixed costs change ONLY AFC and ATC Change! TP VC FC TC MC AVC AFC ATC 200 - 1 10 210 2 16 216 6 8 100 108 3 21 221 5 7 66.6 73.6 4 26 226 6.5 50 56.5 30 230 40 46 36 236 33.3 39.3 246 6.6 28.6 35.2 MC and AVC DON’T change!

Shift from an increase in a Fixed Cost MC ATC1 ATC AVC Costs (dollars) AFC1 AFC Quantity

Shift from an increase in a Fixed Cost MC ATC1 AVC Costs (dollars) AFC1 Quantity

What if the cost for variable resources increase Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 10 110 2 16 116 6 8 50 58 3 21 121 5 7 33.3 30.3 4 26 126 6.5 25 31.5 30 130 20 36 136 16.67 22.67 46 146 6.6 14.3 20.9 What if the cost for variable resources increase

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 10 110 2 16 100 - 1 10 110 2 16 116 6 8 50 58 3 21 121 5 7 33.3 30.3 4 26 126 6.5 25 31.5 30 130 20 36 136 16.67 22.67 46 146 6.6 14.3 20.9

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 11 110 10 2 100 - 1 11 110 10 2 18 116 6 8 50 58 3 24 121 5 7 33.3 30.3 4 30 126 6.5 25 31.5 35 130 20 26 43 136 16.67 22.67 55 146 6.6 14.3 20.9

Which Per Unit Cost Curves Change? Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 11 111 10 110 2 18 118 6 8 50 58 3 24 124 5 7 33.3 30.3 4 30 130 6.5 25 31.5 35 135 20 26 43 143 16.67 22.67 55 155 6.6 14.3 20.9 Which Per Unit Cost Curves Change?

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 11 111 10 110 100 - 1 11 111 10 110 2 18 118 7 8 50 58 3 24 124 6 33.3 30.3 4 30 130 6.5 25 31.5 5 35 135 20 26 43 143 16.67 22.67 55 155 12 6.6 14.3 20.9 MC, AVC, and ATC Change!

Shifting Costs Curves TP VC FC TC MC AVC AFC ATC 100 - 1 11 111 110 2 100 - 1 11 111 110 2 18 118 7 9 50 58 3 24 124 6 8 33.3 30.3 4 30 130 7.5 25 31.5 5 35 135 20 26 43 143 7.16 16.67 22.67 55 155 12 7.8 14.3 20.9 MC, AVC, and ATC Change!

If variable costs change MC, AVC, and ATC Change! Shifting Costs Curves If variable costs change MC, AVC, and ATC Change! TP VC FC TC MC AVC AFC ATC 100 - 1 11 111 2 18 118 7 9 50 59 3 24 124 6 8 33.3 41.3 4 30 130 7.5 25 32.5 5 35 135 20 27 43 143 7.16 16.67 23.83 55 155 12 7.8 14.3 22.1

Shift from an increase in a Variable Costs MC1 MC ATC1 AVC1 ATC AVC Costs (dollars) AFC Quantity

Shift from an increase in a Variable Costs MC1 ATC1 AVC1 Costs (dollars) AFC Quantity