Industrial economics through much of its development was a dialogue between groups of researchers between different world views. The structure-conduct-performance school believed that elementary price theory was often inadequate to explain real-world events and that observation should guide the development of models sophisticated enough to explain the real world. The Chicago school believed that contradiction [...]

Average cost is the sum of average fixed cost and average variable cost. At low output levels, average fixed cost is quite large because the rental cost of capital assets is spread over only a few units of output. Hence, at low output levels, average cost is substantially greater than average variable cost.
On the other [...]