curve.

This idea of the marginal cost “pulling down” the average cost or “pulling up” the average cost may sound abstract,

but think about it in terms of your own grades. If the score on the most recent quiz you take is lower than your

average score on previous quizzes, then the marginal quiz pulls down your average. If your score on the most recent

quiz is higher than the average on previous quizzes, the marginal quiz pulls up your average. In this same way, low

marginal costs of production first pull down average costs and then higher marginal costs pull them up.

The numerical calculations behind average cost, average variable cost, and marginal cost will change from

firm to firm. However, the general patterns of these curves, and the relationships and economic intuition

behind them, will not change.

Lessons from Alternative Measures of Costs

Breaking down total costs into fixed cost, marginal cost, average total cost, and average variable cost is useful
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