Using rental cost for the cost of the services of fixed capital, average cost is total cost-fixed cost plus variable cost-per unit of output. Average variable cost is variable cost per unit of output.
The short-run average cost and average variable cost curves are usually drawn with the parabolic shapes. These illustrate the law of diminishing [...]

This is the opportunity cost to the firm of using its own plant and equipment. If it did not use the plant and equipment it self, the firm could rent them to some other firm and earn the market rental rate. By using the plant and equipment it self, them firm gives up the opportunity [...]

For short time periods, it is often useful to think of the inputs employed by a firm as being of two types. The firm employs a given amount of fixed inputs, determined by its past investment decisions. These cannot be changed in the short run and are used in the fixed available amount regardless of [...]