Shape of the Prime Cost Curves

Abstract

A short survey will now be attempted of the factors that determine the Shape of the Prime Cost Curves. It is in the first place clear that prime cost of production commonly includes certain elements of an overhead nature which are excluded from fixed cost by the rigidity of our definition. They are overhead in the sense that they are rather inflexible, but they are not fixed in the sense that they are part of the cost of producing nothing.¹ Expenditure on fuel, lighting, repairs and renewals, and salaries would often increase very rapidly as the output is raised from zero to a small level; beyond this point it would increase much more slowly. The effect of these quasi-fixed elements on the average prime cost curve is similar to that of fixed cost on the average total cost curve: the curve falls as the output increases.