Linear Total Cost Function
A linear cost function has the form: TC = a + bQ
Where TC is the total cost, Q the output level, a the fixed cost and b the marginal rate of change in cost when output changes. Fig 6.8(a) shows a linear TC function. The average or unit cost function can be obtained by dividing the total cost function by output. That is,
ATC = TC/Q = a+b/Q
![1624_Linear Cost Function.png](https://www.expertsmind.com/CMSImages/1624_Linear%20Cost%20Function.png)
The shape of average or unit cost function is shown in fig. 6.8 (b). At zero output level the total cost comprises total fixed cost that includes depreciation, insurance, and property taxes. In case of a linear function, average variable cost equals b (=ATC - a/Q), and marginal cost also equals b.
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