Cost Shift

   By now you know enough about economists to know that we're never satisfied. It's not enough to draw a nice graph, we have to know what happens if something changes. In the case of cost curves, both fixed and variable costs can change, leading to the need to redraw our cost curves.

   To the right we show the result of an increase in Fixed Costs. MC and AVC are both purely variable costs, so neither of these curves will shift. However, ATC = AVC + AFC. Thus, an increase in a Fixed Cost increases ATC to ATC2, as shown.

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