ee O eT LUal CosTs = Dale PL. Wh Elenlomic Tt ety, Te Hart Rua 1S DEAIED AS THE _74E PERIOD tol Che AZ LEASZ ONE FACTAR (PULLS. FIXED CG CAPITAL. HENCE» THE Tote. COST Fine Lion! Lt THE WOE il LS COoMmPR(SE® OF FIXES CoS7 Aeld VUCABLE CoS. SS oer a7 WS, ~ (A) Zee Fixer Cos7 (ZFC) THIS 1S THE COST OF THE FIXES FacreR IPe T/A THe SHIRT “Run @ 5. Cos? OF CAP TAL. [7 1 NOT RELATED Fo = OUTPUT An THREE DOES Wor VeVey “rr OleTP ur. L718 ALSO Kntouial AS [01D/RECL COST Api (LS TE. AAtinlirdttad COST OF BUSINESS THAT 15 INE UCRED EVE /fe OUTPur = Oe. Coustav7).- fA | t Pe FO@ Date (8) 7ezAl_VAABLE Cosy (7Vc) Fes }S THE CoS? OF 7HE Vhz2LHBLE FACTOR INPUT, Dikecry RELATED TO CU7PUT AND THEREFGCE VARIES cst 7 _0tTPUR IT Chal ASO BE DEANED AS THE COST OF Goons PRdUCED. Jf OUPUT =O, THE TVC =O. HeREreRE, TVC Fue Ten) SARIS FRA THE O%RG1Al AND RISES AS OUTPUT 1ACEAES. WE RATE OF WlGeEASE ss TUC tT Encl ABDI TrontAe Warr PRODUCER 1S Kniotial AS Atte tALAC. COST , tiie 1S MINTMEMATICALLY THE SLOPE OF 7VC_. Fens ptees, Amar Wl ORDER Te bTéRPRET THE StePE OF TVC , (778 (APORTANT Te UNDERSTAND THR MATURE Awd BEHAVIOR. OF SAC = 2 deg] a Dri ZHE Sieh Rebel, A_fifent (lGREAGES OuTALT BY bMPLoyine *lekRt NAGAR E FACT 2 IdPUTS C3. LABOUR ACA ST A_FIMED FACTR (APLT 0:9. CAP(TAL, Tube Pohé , SH227 —RUinl EXPAN 001 PITH DEPENDS Pol MARE IC REftiieaS. To A VARIABLE FACTO? , ALSO Kdlowdal AS AMARC WAL PRODUCT OR MAR Gift Piss IeAt PRODUCT CHE) 10 = ong {RATE OF (CREASE tel Zo ThL OCT “NTH EACH EXTRA tun 7 OF VARIABLE UIPUT” ELPLO VED | OVER pial y STATS TEAl OBSERVAT (OMS, ECOns0ANISTS HAVE Fetwld WAT AML IiiTidely RISES BUT THEA Died tis 1SHES OKT WREASIAE ETE 0F VARIABLE IncPu7? EMPL oes. THs 1s Karen AS CAw OF Diatiiistine RETueNE Qr7R)- As_A_ RESULT, PIPL Has THE Fellew(Ne SHAPE >ee SS. Date MPR VARPBLE wPur e BAB 02. Euttonsient Bpiétsl. (MP Pr SRAdE MPR. = die, => das ep. dt SRMC = Ave Oe de Mh am ma “) Tits PROVES THAT SRMC 1S NERSELY RELATED To #1 SeAC(S) Sa SRMC 1s THe BASIS OF SUPpLy SHESULE OF A_Fueer,Date OVER THE RAnlGE OF OUTPUT THAT SRtac Diet ia SHES. Bur WV), 7VC WcREASES AT A DEGASANE RATE. THe Pota7 WWERE SKMC 18 Mialeutl BED tilt BE A Pole OF INFLECTIOp ON FV C Fivtetlons_, THeeeaf eR, SRM Cth CREASES AT An! _ INCREASING RATE DUE To Dre AND _THELREPERE — TVC nVCREASESD AT INGREACIME RATE TOs tn We (STC: SHaet—Rus Forde _Cos7 Lnicé S76 = 7FC FTV, /7 BEGINS Fon TFC Ont THe NERTICAL AXIS AnD RISES ONTM DSCREASIAE OutPUT Due Te RISE 1 7VC. = £ oe we Gre mau co ZW- © nee a“ SHORT Ril AVERAGE COSTS. zs ~ A)Ave. Fixen Cost (AFC) | eC Tog i SINCE TFC 1S ConlSTANT, ia a AFC 1S PERPETUALL LY DOW ACARD SLePas 6 ee lth (Oke Rae 0UuTPu 7 (BUT NEVER INTERCEZTS C-AXIS) , ~ @ Ave. Viense Coser (AVE) ~ GET AE SRMEIS THE WWERTED MiheoR leaAée OF (WPL, AVE 16 SuAhhly JVERSELY REMATED To AP Ave: Faery Aha or = ice AVE = Teg. = a js ee ani 5 VARIABLE PUT AVE z | <7 [ U-swieer] 4 - = > O74© (©)~SHek7- Run Ave. Zorat Cosr (FRAC) SRAC = AFC + AVE SUPfase TozAt Cos? Fiwezlon: Ge) SS ie = CO) Ge => St0pe_0F AC Cuave_; gee = C@.Q2-— (® oe = CO nCO “RQ a ae = Ae a S HENCE 5 dase. ee Me i tA ME | Sere ANE SRAC 1S (SHAPED, AIC? INTEREECTS. AC AZ 17: izpe LI LI COSTS Se Date _ m4 Fret 0 pldusrity 15 Sard Fe BE EXPAND nl AL ont A TS CONE =~ Rui EXSAAS1 On PATH bittny ALL FACTOR LAP Ts ~ ARE VARIABLE AnD SCALED UP Te /ACREASE OUTPUT. Heck, in THE Lone =u, THe RATE OF INCREASE fn) Forte Ou7Per Déteni2s Pon Kerns Zo Scat. (e AXED FACTOR PROPORTi0ndS) » od A) INCREASING Keni Fo Scale (€cononties oe Scace) A PRooucee ExPlereicés EOS 1 Toit OUTPUT CEA SES PROPORTIONATELY (OLE aftr THE INCREASE In THE SCALE OF a (INPUTS £g- AS _(NPUTS ARE DOUBLED , 7Fo7t Ou 7PuUT A PORE Titel DOUBLES, Wid SUCCESTS Ar’ INCREASE [rl ~ FROBUCTIWV TS AND Const Qiea7hy THE PRODUCTOS FtilCT(Ovs. SHIT HoeiZenTitly Te THe ie 7 (MCREASE fol PUTS). Arcd Veer icdaly UPIARDS ((NCREME 0 FRODUCTIVITY) . Aecondmichy , Tite CSS FunleT tons GQRAC, SRC) este ET WRI Bod Athy RIEHTOARDS (neeeente (nl FeTAe OUTPUT) AOD a VERTICNLY Downs WADS (“reoved Cost EFFICIENCY) urPUt E a Ee a SRAGS1) = re - ik SAC, sxete{Sa) ERAC o C | SkMa | DowowARD me | E | Sb0An/e a | LRA = = SS oa ee abate (® Cousraadt Kerueus To Scarce A. eopucék ExPéeeNCES "CRS" 16 Tome OUTPUT CREATES PurReCrtYY PROPORTION TELY Ze TUE SCte€ OF nPUTS. ve AS tiPUuTs RE POUBLEP , Zo7At._0u-7PUT ALSO Doubles. TiS occurs WsHérl FAcrepe_ Pladucrin ry Lub UNCHANGED Ar > CONSE WENZEL: THERE ditt RE Ao City CE IN COST Exkicvency €l7¢ER (LAC HORI Zat7AD, 5 ure ¢ SACLE.) SRHEA(Ea), as SAG SRM, See fn SZ. ©) Decatssnle RETURNS Zo SCALE DRS Plies THAT _FeTAl. OUTPUT. Ge PROPOR TAME — > C€SS__Titnl Tht INCREASE (as _SCHEE OF INPUTS CG. AS _INPUTS ARE DOUBLES , 707At O77 UT CEES itr) DOUBLES. Tis _wouth BE CAUSES By A FAL (rl FACT oR Phobuctizy WHICH il Teta) CAuSES Cos7 MNEFFICLEMEY C LRAC Lena SLOPE).: @ Date oe at { z + 4 aaa * site Te oe SPU ancy | a TRAC . Se Serer ey See ee JL© SAAC =LRAC > lee q N t } ¢ a a HUT® Date LEAC ts A tine Tut7 ENVELOPES (Tamcent) Ate 7 SKAC ceRVes AS A PRobucée EXPANDS J THE Lene —Rut - purity as ZRS’ occurs, LRAC 1S DecilisARds SboPule AND TANGENTIAL To SRAC CaRVES AT A POINT WHEE SRAC US STe FaAttine. Tite REAS 00d Fo THIS (© THAT AT THE Pun7 DE TAnGency, LRAC = SRAC Awd meeeroee STC = LTC Goce). Az fly 0u7PUT LESS CR 1WRE THbel TiC Poin» RACHLAAC AND THEREFORE STC > LTC. TiS SUCCESTS Taz AT THE PUNT t1HERE SRAC = LRAC Taveenc/) , SRMC must BE MNTERSE CHC LRIDC AT TIS OUTPUT LEVEL AND Since B07 CRAC Anis SRAC Ake Src FALLING , IF PAS AEA THAT SRC < SRAC An® LRMC < RAC. Duane CR6? , RAC BECoues HogiZe TA Far) And 1S FanlGENTIAL AL Tue LEAST Cos? PornT oF SRAC. Ourrur 1S PReduUCTVELY EFFICIENT AT THIS POINT AnD LaMC InzeeseCTs LeAC €.e. CRMC = LRAC. CNH Continitous ExPMSIOS OF PLANT SIZE, MARPCEAENZ DUFICULTIE MAY CAUSE FACTOR PRODUCTI Ty Fo DECREASE » SRAC ca/ee SHIFT OUTEOARDS. And UPOHLDS . ACCORDINGEY, CRAC bite ALSO RISE And lite Nod BE TCE TAAL 2171. SRAC AT A_PoIuz WHERE SRAC IS ALSO UPWARD SLOPE. Ys 16. BECAUSE SRE THE POINT OF INTERSECTION! B/EEN SRMC Andes CRAIC Witt Wee) BE ABOVE SRAC And LRAC ,