fixed cost. Mathematically, the denominator is so small that average total cost is large. Average total cost then

declines, as the fixed costs are spread over an increasing quantity of output. In the average cost calculation, the

rise in the numerator of total costs is relatively small compared to the rise in the denominator of quantity

produced. However, as output expands still further, the average cost begins to rise. At the right side of the

average cost curve, total costs begin rising more rapidly as diminishing returns come into effect.

We obtain average variable cost when we divide variable cost by quantity of output. For example, the variable

cost of producing 80 haircuts is $400, so the average variable cost is $400/80, or $5 per haircut. Note that at

any level of output, the average variable cost curve will always lie below the curve for average total cost, as
{"title": "Principles of Microeconomics 3e", "file_size_mb": 26.99, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:24:38.309401", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "creator": "PDFMiner", "file_type": ".pdf", "uploaded_via": "batch_uploader", "total_pages": 597, "batch_upload": true}