Shifts in the Cost Curves

Cost curves shift in response to changes in two factors:

1. Technology.

A technological change that increases productivity shifts the product curves upward and the cost curves downward. If a technological change results in the firm using more capital, the average fixed cost curve shifts upward and at low levels of output, the average total cost curve may shift upward. At large output levels, average total cost decreases.

2. Prices of factors of production.

An increase in the price of a factor of production increases costs and shifts the cost curves upward. An increase in fixed cost does not affect the variable cost or marginal cost curves (TVC, AVC, and MC curves). An increase in variable cost does not affect the fixed cost curves (TFC and AFC). The total cost curves (TC and ATC curves) are affected by a price change for any factor of production.

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