Short run costs and Revenue

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  • Costs And Revenue
    • Marginal Cost
      • The cost of increasing production by one extra unit
      • Marginal Cost curve first fall then rise
    • Marginal Revenue
      • Extra revenue generated by selling one more game
    • Profit Maximisation
      • A firm maximises profit by producing up to the point where marginal cost = marginal revenue
  • Total Fixed Costs do not vary with the level of production
    • Average fixed costs fall as output increases but total fixed costs remain constant
  • Total Variable Costs are costs whose magnitude varies directly with the rate of production
    • AVC are U shaped. First AVC falls then it starts to rise again
      • Average total costs have a similar shape to AVC. Once the increase in AVC outweighs the fall AFC, the average total costs will start to rise.


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