20. Short Run Cost Curves from Short Run Production

In this video, I derive the short run average variable cost, marginal cost, and average cost curves. In particular, I demonstrate why these curves are U-shaped. I also demonstrate why the MC curve intersects AVC and AC at their minimum points.

This discussion is fundamental to deriving the framework for understanding firms' supply decisions. The graph is also indispensable in the study of entry, exist, and industry competiton.

For a list of videos and links to these videos (organized by topic), check out the Intromediate Microeconomics video web page:

http://blog.thisyoungeconomist.com/p/learn-microeconomics.html

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• short run production
• average variable cost
• marginal cost
• average cost
• average fixed cost
• marginal product
• average product
• averages and marginals
• production and costs
• economics lectures
• intromediate microeconomics
• short run costs
• economics without calculus
• U-shaped
• inverted-U shaped
• tutorial

[mthirkettle]

At 5minutes, you drew AVC and MC, in such a way that would intersect the y-axis at different points.

AVC and MC must intersect Y axis at the same point.

Just being pedantic, but great video never the less.

[intromediateecon]

@mthirkettle You're right. I should have been more explicit by drawing the two curves to have the same intercept. I have been meaning to post another video on cost curves (to supplement this one, not replace it). In that video, I'll be more explicit about the two curves having the same intercept. Thanks!

[bsdlite]

@mthirkettle true, unless AP and MP are zero at L = 0, as typically drawn

[intromediateecon]

@bsdlite Another good point. In this case, both AVC and MC would shoot toward infinity at zero. For this example, they have the same non-intercept (strangely).

If the point @mthirkettle makes is that MC and AVC start at the "same place," that point remains valid. But, it is right to call it pedantic... the whole point is to give a reason for U-shaped cost curves.

[samchenliwei1990]

Hi I have a Question. When does MC and AVC starts at the same point in the graph? I mean the intercepts with Y-axis is the same?

[TheIslandGIL]

Hi i really like your video but plese how can we reduce a Cost of Production in a Short Run?

[Beetroots19]

Your better then my lecturer in TCD.

Your very good at explaining the concept.

Thank you.

[erochelle2612]

Thank you for loving this so much to post this well-produced and organized video. You saved me on an exam! Blessed Be!