The supply curve of a firm in the short run is the average total cost curve of the firm, at or above the shutdown point.

The complete the graph task in Checkpoint 12.4 provides you experience in graphing the long run average total cost curve.

 12.3   Explain the relationship between a firm's output and costs in the short run.

 12.4   Derive and explain a firm's long-run average cost curve.

 12.3   Explain the relationship between a firm's output and costs in the short run.

A.  As total product increases, total fixed cost is constant, and total variable cost and total cost increase.
B.  As total product increases, average fixed cost decreases and average variable cost, average total cost, and marginal cost decrease at  small outputs and increase at large outputs.  Their curves are U-shaped.

 12.4  Derive and explain a firm's long-run average cost curve.

A.  In the long run, the firm can change the size of its plant.
B.  Long-run cost is the cost of production when all inputs have been adjusted to produce at the lowest attainable cost.
C.  The long-run average cost curve traces out the lowest attainable average total cost at each output when both capital and labor inputs can be varied.
D.  The long-run average cost curve slopes downward with economies of scale and upward with diseconomies of scale.

Take the optional post-study bonus point quizzes on Production and Cost on Saturday following Module 6.

Take the optional pre-study bonus point quizzes on Perfect Competition on Sunday preceding Module 7.

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