any level of output, the average variable cost curve will always lie below the curve for average total cost, as

Figure 7.8 shows. The reason is that average total cost includes average variable cost and average fixed cost.

Thus, for Q = 80 haircuts, the average total cost is $8 per haircut, while the average variable cost is $5 per

haircut. However, as output grows, fixed costs become relatively less important (since they do not rise with

output), so average variable cost sneaks closer to average cost.

Average total and variable costs measure the average costs of producing some quantity of output. Marginal cost

is somewhat different. Marginal cost is the additional cost of producing one more unit of output. It is not the

cost per unit of allunits produced, but only the next one (or next few). We calculate marginal cost by taking the
change in total cost and dividing it by the change in quantity. For example, as quantity produced increases
{"batch_upload": true, "upload_timestamp": "2026-02-07T15:24:38.309401", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "file_size_mb": 26.99, "uploaded_via": "batch_uploader", "file_type": ".pdf", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf"}