Costs in Transport Economics

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  • Costs
    • Types of Cost
      • Variable - vary with the level of output
      • Fixed  - remain the same despite changes in output
      • Marginal Cost - the change in total cost when one more unit of output is produced
      • Average Cost - the unit cost of production
    • Long Run
      • Average Fixed Cost curve falls consistently, which is indicative of how total fixed costs are spread out as output increases
      • Average variable costs will eventually outweigh the effect of the falling average fixed cost curve causing the average cost curve to rise
      • Output increases, average variable costs will initially decline and then rise again
      • The marginal cost curve always crosses the average variable cost and average cost curves at their lowest point

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