... marginal cost (MC), average fixed cost (AFC), average variable cost (AVC) and average total cost (ATC). In a graph, those four measures represent the firm's cost structure which covers all costs associated with production, including risk cost and opportunity cost (Mckenzie & Lee, 2003). Their relationships in short run (i.e. at least one resource can not be changed) will be shown in Figure.1: MC curve and AVC curve always intersect at the lowest point of AVC curve. The reason is: AVC is pulled down by declining of MC first, and then declines slowly for increasing of MC, finally, increases after AVC intersects MC. Under the similar reason, MC also intersects ATC at the lowest point of ATC curve. If there is an increase of ATC from ATC1 to ATC2 caused by an increase of AVC, MC will also increases from MC1 to MC2. Production at price P1 will decreases from Q1 ...

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