Modeling the Firm - Average Costs
Overview
Average costs are the total costs to the firm divided by the number of units of product produced.
{% Average \; Cost = Total \; Cost / q %}
When costs can be broken down in to fixed variable costs, the average costs can also be computed from fixed and variable costs.
{% Average \; Cost = V + v\times q + F/q %}
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The slider represents the variable cost (sliding the slider right increases the variable cost).
When the variable cost is zero, the average costs asymptotically approach a flat cost curve equal
to the variable cost. The average cost curve at q=1 is approximately just the total fixed costs.
