# Summary

• Cost analysis refers to the study of behaviour of cost in relation to one or more production criteria.
• Explicit cost also known as direct cost.
• Implicit cost is the cost which is not recognised in the books of accounts. It is also a part of the opportunity cost.
• Semi-variable cost is the cost which is neither perfectly fixed nor perfectly variable.
• Fixed costs are also called as sunk costs.
• Total fixed costs are constant, so the average fixed cost curve diminishes with the output. Thus, the average fixed cost curve is a rectangular hyperbola.
• The ATC curve will always be U-shaped because of the operation of the law of returns to scale.
• MC is obtained by calculating the change in TC as a result of a change in the total output.
• ATC curve first falls, reaches itβs minimum and then rises. The ATC curve changes because of MC.
• Fixed costs do not change with output. Therefore, the average variable cost comes down.
• Variable cost increases, but not in the same proportion as the increase in output.
• Marginal cost declines gradually and then increases.
• MC = AC when average cost is at minimum.
• The long run average cost curve (LAC curve) is the locus of all the short run curves.
• LAC is also known as the planning curve.