Cost Curve/ Revenue Curve

- It is a graph of cost of production as a function of the quantity demanded.

- In a free market economy, the productive firm will use the cost curve to find out the optimal point of production, where they are able to find out the maximum point of profit.

- Diminishing return scale. It refers to the marginal product of each unit will decline as the amount of the input increases whn holding all the other input stays constantly.

- In the cost curve, it have showned in 2 ways which are the Short-run Cost Curve (SRAC) and Long-run Cost Curve (LRAC). SRAC only consists of the variable and fixed cost whereas the LRAC consits all the consts.

- MC (Marginal COst) rises with a quantity of output.

- ATC curve is in U-shaped and the MC curve crosses the ATC as its minimim.

- LRAC can be divided into 3 scale.
(i) Contant Return to Scale (The proportion increased of the input may increasing the outputs in the same proportion).
(ii) Increasing Return to Scale ( Output may incresed greater proportion thn the input use)
(iii) Decreasing Return to scale ( Output may increase lesser proportion thn the input use)