Fixed costs, marginal cost,total cost, average cost and variable cost:
From the above diagram we can see that the fixed costs do not change with output. The distance between total costs and total variable costs is equal to total fixed costs. We can see that the TC and TVC curves exhibit first decreasing and then increasing marginal cost. Marginal cost decreases as the marginal product from each additional unit of labour increases, until it reaches the point of diminishing marginal productivity, after which the marginal cost increases.
Mc curve intersects the AVC and ATC curves from below at their minimum points. When MC is below the AVC and ATC, they are decreasing. When MC exceeds AVC and ATC they are increasing. The MC curve is J shaped as the marginal cost first declines and then increases. The AFC curve is downward sloping as the fixed costs get spread over larger and larger units of output produced.
Breakeven and Shutdown points under perfect and imperfect competition for both price searchers and price takers: