1. Lectures in Microeconomics-Charles W. Upton Marginal and Average Cost

2. A Cost Function

3. Marginal and Average Cost Average Cost

4. Marginal and Average Cost Average Cost

5. Marginal and Average Cost Marginal Cost

6. Marginal and Average Cost Marginal Cost

7. Marginal and Average Cost A Key Proposition If MC < AC, AC is falling

8. Marginal and Average Cost A Key Proposition If MC < AC, AC is falling If MC = AC, AC is constant

9. Marginal and Average Cost A Key Proposition If MC < AC, AC is falling If MC = AC, AC is constant If MC > AC, AC is rising

10. Marginal and Average Cost A Key Proposition If MC < AC, AC is falling If MC = AC, AC is constant If MC > AC, AC is rising Intuitively, the only way AC can be rising is if the incremental units cost more than the average.

11. Marginal and Average Cost The Proposition Illustrated

12. Marginal and Average Cost MC<AC; AC Falling

13. Marginal and Average Cost MC>AC; AC Rising

14. Marginal and Average Cost MC=AC; AC Constant

15. Marginal and Average Cost The Graph AC MC

16. Marginal and Average Cost The Graph AC MC

17. Marginal and Average Cost The Mathematics

18. Marginal and Average Cost The Mathematics

19. Marginal and Average Cost The Mathematics

20. Marginal and Average Cost The Mathematics

21. Marginal and Average Cost The Mathematics

22. Marginal and Average Cost The Mathematics If MC > AC, AC is rising; MC < AC, AC is falling

23. Marginal and Average Cost The General Relation AC MC

24. Marginal and Average Cost The U-Shaped AC Curve AC MC

25. Marginal and Average Cost The U-Shaped AC Curve AC MC This is an empirical statement, not a general requirement Lets defer the question of why this relation until later.

26. Marginal and Average Cost End ©2004 Charles W. Upton