Economics, 3rd Edition

Luciano’s Average Cost and 

Marginal Cost Curves

This figure shows the average total cost 

(ATC), average fixed cost (AFC) average 

variable cost (AVC) and marginal cost 

(MC) for Luciano’s Lemonade Bar. All of 

these curves are obtained by graphing 

the data in Table 6.2. These cost curves 

show three features that are typical of 

many firms: (1) marginal cost rises with 

the quantity of output; (2) the average 

total cost curve is U-shaped; (3) the 

marginal cost curve crosses the average 

total cost curve at the minimum of 

average total cost.

L

i

’ A

C

FIGURE 6.3

€3.50

3.25

3.00

2.75

2.50

2.25

2.00

1.75

1.50

1.25

1.00

0.75

0.50

0.25

Costs

0

1

2

3

4

5

6

7

8

9

10

MC

ATC

AVC

AFC

Quantity of output

(glasses of lemonade

per hour)

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142  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

The cost curves shown here for Luciano’s Lemonade Bar have some features that are common to 

the cost curves of many firms in the economy. Let’s examine three features in particular: the shape 

of marginal cost, the shape of average total cost, and the relationship between marginal and average 

total cost.