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Concept# Cost curve

Summary

In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. In a free market economy, productively efficient firms optimize their production process by minimizing cost consistent with each possible level of production, and the result is a cost curve. Profit-maximizing firms use cost curves to decide output quantities. There are various types of cost curves, all related to each other, including total and average cost curves; marginal ("for each additional unit") cost curves, which are equal to the differential of the total cost curves; and variable cost curves. Some are applicable to the short run, others to the long run.
Notation
There are standard acronyms for each cost concept, expressed in terms of the following descriptors:
*SR = short run (costs spent on non-reusable materials e.g raw materials)
*LR = long-run (cost spent on renewable materials e.g equipment)
*A = average (per unit of output)
*M = marginal (for an additio

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2017