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LERNER INDEX: The difference between price (p) and marginal cost (mc) as a fraction of price, that is [p-mc]/p. The Lerner index is usually taken as an indicator of market power because the larger the index, the larger the difference between price and marginal cost, that is, the larger the distance between the price and the competitive price. The Lerner index depends on the elasticity of demand. The Lerner index is also called the price-cost margin.
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                           AVERAGE FIXED COST CURVE: A curve that graphically represents the relation between average fixed cost incurred by a firm in the short-run product of a good or service and the quantity produced. This curve is constructed to capture the relation between average fixed cost and the level of output, holding other variables, like technology and resource prices, constant. The average fixed cost curve is one of three average curves. The other two are average total cost curve and average variable cost curve. A related curve is the marginal cost curve. Average Fixed Cost Curve |  | The average fixed cost curve is negatively sloped. Average fixed cost is relatively high at small quantities of output, then declines as production increases. The more production increases, the more average fixed cost declines. The reason behind this perpetual decline is that a given FIXED cost is spread over an increasingly larger quantity of output.The graph to the right is the average fixed cost curve for the short-run production of Wacky Willy Stuffed Amigos (those cute and cuddly armadillos and tarantulas). The quantity of Stuffed Amigos production, measured on the horizontal axis, ranges from 0 to 10 and the average fixed cost incurred in the production of Stuffed Amigos, measured on the vertical axis, ranges from a high of $6 to a low of $0.30. Actually, if the quantity is extended beyond 10 Stuffed Amigos, then average fixed cost is less than $0.30. Or if the quantity is reduced below 1/2 unit, then average fixed cost is greater than $6. For the geometrically inclined, this average fixed cost curve is a rectangular hyperbola. This declining average fixed cost curve is a major reason that the average total curve is negatively sloped for relatively small output quantities. In fact, firms that use a lot of fixed inputs relative to variable inputs, such that fixed cost is a substantial share of total cost, spend a lot of their production time in the decreasing portion of the average total cost curve. This has a big impact on how these firms operate. If average total cost declines with additional production, then a firm can profitably charge a lower price with increased output.
 Recommended Citation:AVERAGE FIXED COST CURVE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 18, 2025]. Check Out These Related Terms... | | | | | | | | | | | | | Or For A Little Background... | | | | | | | | | | | | And For Further Study... | | | | | | | | | | | | | | | | | |
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BROWN PRAGMATOX [What's This?]
Today, you are likely to spend a great deal of time browsing through a long list of dot com websites seeking to buy either a case of blank recordable DVDs or a pair of red goulashes with shiny buckles. Be on the lookout for mail order catalogs with hidden messages. Your Complete Scope
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The earliest known use of paper currency was about 1270 in China during the rule of Kubla Khan.
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"A winner is someone who recognizes his God-given talents, works his tail off to develop them into skills, and uses those skills to accomplish his goals. " -- Larry Bird, basketball player
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FXA Foreign Exchange Agreement
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