7.4 Costs in the Short Run LO 4
Short-run average total cost curves are often U-shaped because
average product increases at low levels of output but eventually
declines sufficiently to offset advantages of spreading overheads.
The MC curve is downward sloping when MP is rising; it is upward
sloping when MP is falling.
The output corresponding to the minimum point of a short-run
average total cost curve is called the plant’s capacity.
Changes in factor prices shift the short-run cost curves—upward
when prices rise and downward when prices fall.