Cost, Marginal cost, Average cost
If cost is linear with quantity, then average cost is marginal cost.
Usually, the curve ( vs ) is first concave, and then convex. These are studied independently. The shape looks like a sigmoid curve, but along the axis.
As quantity increases, the cost increases at a decreasing range. That is, marginal cost decreases in the concave region.
From the point of inflection, the curve becomes convex. The rate of increase in cost with quantity increases. Or, cost increases at an increasing rate. That is, marginal cost increases.
Why does this change? The decreasing marginal rate is due to the fixed assets, which do not add to the cost for producing more. However, after the inflection point, additional resources such as overtime work (which usually costs more, and the rate of increase of wage increases with increasing overtime; i.e, if 1 hour of overtime costs , then 2 hours can cost more than ). Other factors include electricity (which is charged similar to the overtime pay).
Average cost. In the concave region, average cost is decreasing, and increasing for the convex region. It is "U" shaped.
Marginal cost is similar to the average cost, but is lower than the average curve in the concave region, but larger than the average cost in the convex region. This is because marginal cost takes into account the cost for the last unit produced, whereas average cost takes into account all the units produced (which was initially low). Thus, in the convex region marginal cost keeps increasing due to the increasing cost.
The minima of the marginal cost occurs at the inflection point.
The intersection of marginal cost and average cost is the minima of average cost. Why? Because the average cost starts increasing when marginal cost becomes larger than the average cost.
Market power: the ability of the first to determine price. It can be seen as a spectrum. If they have zero control over price, then it is called perfect competetion. If they have absolute control over price, it is called a monopoly. Perfect competetion is an idealised structure and is used only for comparison. Electricity board is an example of a monopoly. If there are two firms, then it is called a duopoly. If more than two then it is a polypoly. jk, it is called an oligopoly. Commonly seen.
Market. Does not have to be a physical place. It can be viewed as an institution, where buyers can interact with sellers.