Non Constant Variable Costs
Overview
When the variable cost is not constant, i.e. dependent on the level of product being produced, then the
total cost curve will not be a straight line. This curvature in the curve may present both challenges to
optimizing firm profits, as well as oppurtunities to exploit.
Non Constant Variable Costs
The simple model above assumes that variable costs are constant. (That is, each additional unit of product
costs a fixed amount to produce, no matter how many units you are currently producing.)
{% TC = F + V \times q + v \times q^2 %}
- F = fixed costs
- V = Variable costs
- v = variable effect
(This equation is an application of
Taylors Series
and is a simplification)
copy
