Cost curves are graphical representations that show the relationship between the quantity of output produced and the costs incurred by a firm. They help analyze how changes in production levels affect costs.
Imagine cost curves as the tracks on a roller coaster ride. Each curve represents a different aspect of the ride - like how much it costs to maintain, operate, or add more cars. As you go higher on the track, costs increase, and as you descend, costs decrease.
Marginal cost: The additional cost incurred by producing one more unit of output.
Average variable cost: The variable cost per unit of output.
Average total cost: The total cost per unit of output.
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