7.7 Summary

Section 7 has examined the firm and, in particular, different measures of cost. It has looked at costs in the short run and the long run. It has shown how firms might reduce average cost in the long run, and the constraints that firms face in the short run. You have worked through activities using cost curves to show how average costs are related to output in a period (e.g. per day or week). Understanding cost curves is key to understanding the behaviour of firms, industries, markets, and more widely, the supply side of the economy.