Cost curves
Definition
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.
Analogy
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.
Related terms
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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