Economic and accounting costs.

In economics costs most often referred to as losses that a manufacturer (entrepreneur, firm) is forced to bear in connection with the implementation of economic activities. This could be: the cost of money and time for organizing production and acquiring resources, loss of income or product from missed opportunities; costs of collecting information, concluding contracts, promoting goods on the market, preserving goods, etc. When choosing among different resources and technology, a rational manufacturer strives to minimum costs, therefore selects the most productive and cheapest resources.

The production costs of any product can be represented as a set of physical or cost units of resources expended in its production. If we express the value of all these resources in monetary units, we get the cost expression of production costs of this product. This approach will not be wrong, but it seems to leave unanswered the question of how the value of these resources will be determined for the subject, which will determine this or that line of his behavior. The economist's task is to choose the best option for using resources.

Costs in the economy are directly associated with the denial of the possibility of producing alternative goods and services. This means that the cost of any resource equals its cost, or value, given the best of all possible options its use.

It is necessary to distinguish between external and internal costs.

External or explicit costs– these are cash expenses for paying for resources owned by other companies (payment for raw materials, fuel, wage and etc.). These costs, as a rule, are taken into account by an accountant, reflected in the financial statements and are therefore called accounting.

At the same time, the company can use its own resources. In this case, costs are also inevitable.

Internal costs – These are the costs of using the firm's own resources that do not take the form of cash payments.

These costs are equal to the cash payments that the firm could receive for its own resources if it chose the best option for using them.

Economists consider all external and internal payments as costs, including the latter and normal profit.

Normal, or zero, profit - this is the minimum fee necessary to maintain the entrepreneur's interest in the chosen activity. This is the minimum payment for the risk of working in a given area of ​​the economy, and in each industry it is assessed differently. It is called normal for its similarity to other incomes, reflecting the contribution of a resource to production. Zero - because in essence it is not a profit, representing part of the total production costs.

Example. You are the owner of a small store. You purchased goods worth 100 million rubles. If accounting costs for the month amounted to 500 thousand rubles, then to them you must add lost rent (let’s say 200 thousand rubles), lost interest (let’s say you could put 100 million rubles in the bank at 10% per annum, and receive approximately 900 thousand rubles) and a minimum risk fee (let’s say it is equal to 600 thousand rubles). Then economic costs will amount to

500 + 200 + 900 + 600 = 2200 thousand rubles.

Production costs in the short term, their dynamics.

The production costs that a firm incurs in producing products depend on the possibility of changing the amount of all employed resources. Some types of costs can be changed quite quickly (labor, fuel, etc.), others require some time for this.

Based on this, short-term and long-term periods are distinguished.

Short term – This is the period of time during which a firm can change production volume only due to variable costs, while production capacity remains unchanged. For example, hire additional workers, purchase large quantity raw materials, more intensive use of equipment, etc. It follows that in the short run costs can be either constant or variable.

Fixed costs (F.C.) - These are costs whose value does not depend on the volume of production.

Fixed costs are associated with the very existence of the firm and must be paid even if the firm does not produce anything. These include: rental payments, deductions for depreciation of buildings and equipment, insurance premiums, interest on loans, labor costs for management personnel.

Variable costs (V.C.) - these are costs, the value of which changes depending on changes in production volume.

With zero output they are absent. These include: costs of raw materials, fuel, energy, most labor resources, transport services and so on. The firm can control these costs by changing production volume.

Total production costs (TC) – This is the sum of fixed and variable costs for the entire volume of output.

TC = total fixed costs (TFC) + total variable costs (TVC).

There are also average and marginal costs.

Average costs – This is the cost per unit of production. Average costs short term are divided into constant averages, variable averages and general averages.

Average fixed costs (A.F.C.) are calculated by dividing total fixed costs by the number of products produced.

Average variable costs (AVC) are calculated by dividing the total variable costs on the quantity of products produced.

Average Total Cost (ATC) are calculated using the formula

ATS = TS / Q or ATS = AFC + AVC

The category is very important for understanding the behavior of the company marginal cost.

Marginal cost (MC)– These are additional costs associated with producing one more unit of output. They can be calculated using the formula:

MS =∆ TC / ∆ Qwhere ∆Q= 1

In other words, marginal cost is the partial derivative of the total cost function.

Marginal costs make it possible for a firm to determine whether it is advisable to increase production of goods. To do this, compare marginal costs with marginal revenue. If marginal costs are less than the marginal revenue received from sales of this unit of product, then production can be expanded.

As production volumes change, costs change. Graphical representation of cost curves reveals some important patterns.

Fixed costs, given their independence from production volumes, do not change.

Variable costs are zero when there is no output; they increase as output increases. Moreover, at first the growth rate of variable costs is high, then it slows down, but upon reaching a certain level of production, it increases again. This nature of the dynamics of variable costs is explained by the laws of increasing and diminishing returns.

Gross costs are equal to fixed costs when output is zero, and as production increases, the gross cost curve follows the shape of the variable cost curve.

Average fixed costs will continuously decrease as production volumes increase. This is because fixed costs are spread over more units of production.

The average variable cost curve is U-shaped.

The average total cost curve also has this shape, which is explained by the relationship between the dynamics of AVC and AFC.

The dynamics of marginal costs are also determined by the law of increasing and diminishing returns.

The MC curve intersects the AVC and AC curves at the points of the minimum value of each of them. This dependence of the limit and average values ​​has a mathematical basis.

Every organization strives to achieve maximum profit. Any production incurs costs for the purchase of factors of production. At the same time, the organization strives to achieve such a level that a given volume of production is provided at the lowest possible cost. The firm cannot influence the prices of resources. But, knowing the dependence of production volumes on the number of variable costs, costs can be calculated. Cost formulas will be presented below.

Types of costs

From an organizational point of view, expenses are divided into the following groups:

• individual (expenses of a particular enterprise) and social (costs of manufacturing a specific type of product incurred by the entire economy);
• alternative;
• production;
• are common.

The second group is further divided into several elements.

Total expenses

Before studying how costs and cost formulas are calculated, let's look at the basic terms.

Total costs (TC) are the total costs of producing a certain volume of products. In the short term, a number of factors (for example, capital) do not change, and some costs do not depend on output volumes. This is called total fixed costs (TFC). The amount of costs that changes with output is called total variable costs (TVC). How to calculate total costs? Formula:

Fixed costs, the calculation formula for which will be presented below, include: interest on loans, depreciation, insurance premiums, rent, wages. Even if the organization does not work, it must pay rent and loan debt. Variable expenses include salaries, costs of purchasing materials, paying for electricity, etc.

With an increase in output volumes, variable production costs, the calculation formulas for which were presented earlier:

• grow proportionally;
• slow down growth when the maximum profitable production volume is achieved;
• resume growth due to disruption optimal sizes enterprises.

Average expenses

Wanting to maximize profits, the organization seeks to reduce costs per unit of product. This ratio shows a parameter such as (ATS) average cost. Formula:

ATC = TC\Q.

ATC = AFC + AVC.

Marginal costs

The change in total costs when production volume increases or decreases by one unit shows marginal costs. Formula:

From an economic point of view, marginal costs are very important in determining the behavior of an organization in market conditions.

Relationship

Marginal cost must be less than total average cost (per unit). Failure to comply with this ratio indicates a violation of the optimal size of the enterprise. Average costs will change in the same way as marginal costs. It is impossible to constantly increase production volume. This is the law of diminishing returns. At a certain level, variable costs, the calculation formula for which was presented earlier, will reach their maximum. After this critical level, an increase in production volumes even by one will lead to an increase in all types of costs.

Example

Having information about the volume of production and the level of fixed costs, you can calculate everything existing species costs.

Without engaging in production, the organization incurs fixed costs of 60 thousand rubles.

Variable costs are calculated using the formula: VC = TC - FC.

If the organization is not engaged in production, the amount variable expenses will be equal to zero. With an increase in production by 1 piece, VC will be: 130 - 60 = 70 rubles, etc.

Marginal costs are calculated using the formula:

MC = ΔTC / 1 = ΔTC = TC(n) - TC(n-1).

The denominator of the fraction is 1, since each time the volume of production increases by 1 piece. All other costs are calculated using standard formulas.

Opportunity Cost

Accounting expenses are the cost of the resources used in their purchase prices. They are also called explicit. The amount of these costs can always be calculated and justified with a specific document. These include:

• salary;
• equipment rental costs;
• fare;
• payment for materials, bank services, etc.

Economic costs are the cost of other assets that can be obtained from alternative uses of resources. Economic costs = Explicit + Implicit costs. These two types of expenses most often do not coincide.

Implicit costs include payments that the firm could have received if more beneficial use your resources. If they were bought in a competitive market, their price would be the best among the alternatives. But pricing is influenced by the state and market imperfections. Therefore, the market price may not reflect the true cost of the resource and may be higher or lower than the opportunity cost. Let us analyze in more detail the economic costs and cost formulas.

Examples

An entrepreneur, working for himself, receives a certain profit from his activities. If the sum of all expenses incurred is higher than the income received, then the entrepreneur ultimately suffers a net loss. It, together with net profit, is recorded in documents and relates to obvious costs. If an entrepreneur worked from home and received an income that exceeded his net profit, then the difference between these values ​​would be implicit costs. For example, an entrepreneur receives a net profit of 15 thousand rubles, and if he were employed, he would have 20,000. In this case, there are implicit costs. Cost formulas:

NI = Salary - Net profit= 20 - 15 = 5 thousand rubles.

Another example: an organization uses in its activities premises that belong to it by right of ownership. Explicit expenses in this case include the amount of utility costs (for example, 2 thousand rubles). If the organization rented out this premises, it would receive an income of 2.5 thousand rubles. It is clear that in this case the company would also pay utility bills monthly. But she would also receive net income. There are implicit costs here. Cost formulas:

NI = Rent - Utilities = 2.5 - 2 = 0.5 thousand rubles.

Returnable and sunk costs

The cost for an organization to enter and exit a market is called sunk costs. No one will return the costs of registering an enterprise, obtaining a license, or paying for an advertising campaign, even if the company ceases operations. In a narrower sense, sunk costs include costs of resources that cannot be used in alternative ways, such as the purchase of specialized equipment. This category of expenses does not relate to economic costs and does not affect Current state companies.

Costs and price

If the organization's average costs are equal to the market price, then the firm makes zero profit. If favorable conditions increase the price, the organization makes a profit. If the price corresponds to the minimum average costs, then the question arises about the feasibility of production. If the price does not cover even the minimum variable costs, then the losses from the liquidation of the company will be less than from its functioning.

International distribution of labor (IDL)

The world economy is based on MRT - the specialization of countries in the production of certain types of goods. This is the basis of any type of cooperation between all states of the world. The essence of MRI is revealed in its division and unification.

One manufacturing process cannot be divided into several separate ones. At the same time, such a division will make it possible to unite separate industries and territorial complexes and establish interconnections between countries. This is the essence of MRI. It is based on the economically advantageous specialization of individual countries in the production of certain types of goods and their exchange in quantitative and qualitative ratios.

Development factors

The following factors encourage countries to participate in MRI:

• Volume of the domestic market. U large countries there is greater opportunity to find the necessary factors of production and less need to engage in international specialization. At the same time, market relations are developing, import purchases are compensated by export specialization.
• The lower the state's potential, the greater the need to participate in MRT.
• The country's high supply of monoresources (for example, oil) and low level of mineral resources encourage active participation in MRT.
• The more specific gravity basic industries in the structure of the economy, the less the need for MRI.

Each participant finds economic benefit in the process itself.

Production costs - purchase costs economic resources consumed in the process of producing certain goods.

Any production of goods and services, as is known, is associated with the use of labor, capital and natural resources, which are factors of production whose value is determined by production costs.

Due to limited resources, the problem arises of how best to use them among all rejected alternatives.

Opportunity costs are the costs of producing goods, determined by the cost of the best lost opportunity to use production resources, ensuring maximum profit. The opportunity costs of a business are called economic costs. These costs must be distinguished from accounting costs.

Accounting costs differ from economic costs in that they do not include the cost of factors of production that are owned by the owners of firms. Accounting costs are less than economic costs by the amount of implicit earnings of the entrepreneur, his wife, implicit land rent and implicit interest on equity owner of the company. In other words, accounting costs are equal to economic costs minus all implicit costs.

The options for classifying production costs are varied. Let's start by distinguishing between explicit and implicit costs.

Explicit costs are opportunity costs that take the form of cash payments to the owners of production resources and semi-finished products. They are determined by the amount of company expenses to pay for purchased resources (raw materials, materials, fuel, work force and so on.).

Implicit (imputed) costs are the opportunity costs of using resources that belong to the firm and take the form of lost income from the use of resources that are the property of the firm. They are determined by the cost of resources owned by a given company.

The classification of production costs can be carried out taking into account the mobility of production factors. Fixed, variable and total costs are distinguished.

Fixed costs (FC) - costs, the value of which is short period does not change depending on changes in production volume. These are sometimes called "overhead" or "sunk costs". TO fixed costs include maintenance costs industrial buildings, purchase of equipment, rental payments, interest payments on debts, salaries of management personnel, etc. All these expenses must be financed even when the company does not produce anything.

Variable costs (VC) are costs whose value varies depending on changes in production volume. If products are not produced, then they are equal to zero. Variable costs include the cost of purchasing raw materials, fuel, energy, transportation services, wages of workers and employees, etc. In supermarkets, payment for the services of supervisors is included in variable costs, since managers can adjust the volume of these services to the number of customers.

Total costs (TC) - total costs firm, equal to the sum of its fixed and variable costs, are determined by the formula:

Total costs increase as production volume increases.

Costs per unit of goods produced take the form of average fixed costs, average variable costs and average total costs.

Average fixed cost (AFC) is the total fixed cost per unit of output. They are determined by dividing fixed costs (FC) by the corresponding quantity (volume) of products produced:

Since total fixed costs do not change, when divided by increasing production volume, average fixed costs will fall as the quantity of output increases, because a fixed amount of costs is distributed over more and more units of output. Conversely, as production volume decreases, average fixed costs will increase.

Average variable cost (AVC) is the total variable cost per unit of output. They are determined by dividing variable costs by the corresponding quantity of output:

Average variable costs first fall, reaching their minimum, then begin to rise.

Average (total) costs (ATC) are the total production costs per unit of output. They are defined in two ways:

a) by dividing the sum of total costs by the number of products produced:

b) by summing average fixed costs and average variable costs:

ATC = AFC + AVC.

At the beginning, average (total) costs are high because the volume of output is small and fixed costs are high. As production volume increases, average (total) costs decrease and reach a minimum, and then begin to rise.

Marginal cost (MC) is the cost associated with producing an additional unit of output.

Marginal costs are equal to the change in total costs divided by the change in volume produced, that is, they reflect the change in costs depending on the quantity of output. Since fixed costs do not change, fixed marginal costs are always zero, i.e. MFC = 0. Therefore, marginal costs are always marginal variable costs, i.e. MVC = MC. It follows from this that increasing returns to variable factors reduce marginal costs, while decreasing returns, on the contrary, increase them.

Marginal costs show the amount of costs that a firm will incur when increasing production by the last unit of output, or the amount of money that it will save if production decreases by a given unit. When the additional cost of producing each additional unit of output is less than the average cost of the units already produced, producing that next unit will lower the average total cost. If the cost of the next additional unit is higher than average cost, its production will increase average total cost. The above applies to a short period.

In the practice of Russian enterprises and in statistics, the concept of “cost” is used, which is understood as the monetary expression of the current costs of production and sales of products. The costs included in the cost include costs for materials, overhead, wages, depreciation, etc. The following types of cost are distinguished: basic - the cost of the previous period; individual - the amount of costs for the manufacture of a specific type of product; transportation - costs of transporting goods (products); products sold, current - assessment of sold products at restored cost; technological - the amount of costs for organization technological process manufacturing products and providing services; actual - based on actual costs for all cost items for a given period.

G.S. Bechkanov, G.P. Bechkanova

The concept of average costs. Average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), concept of marginal cost (MC) and their graphs.

Average costs- this is the value of total costs attributable to the amount of production produced.

Average costs are in turn divided into average fixed costs and average variable costs.

Average fixed costs(AFC) is the value of fixed costs per unit of production.

Average variable costs(AVC) is the value of variable costs per unit of production.

Unlike average constants, average variable costs can either decrease or increase as output volumes increase, which is explained by the dependence of total variable costs on production volume. Average variable costs reach their minimum at a volume that provides the maximum value of the average product

Average total costs(ATC) is the total cost of production per unit of output.

ATC = TC/Q = FC+VC/Q

Marginal cost is an increase in total costs caused by an increase in output per unit of output.

The MC curve intersects AVC and ATC at points corresponding to the minimum value of average variables and average total costs.

Question 23. Production costs in the long run. Depreciation and amortization. The main directions of use of depreciation means.

The main feature of costs in the long run is the fact that they are all variable in nature - the firm can increase or reduce capacity, and it also has enough time to decide to leave a given market or enter it by moving from another industry. Therefore in long term They do not distinguish between average fixed and average variable costs, but analyze average costs per unit of production (LATC), which in essence are also average variable costs.

Depreciation of fixed assets (funds) ) – a decrease in the initial cost of fixed assets as a result of their wear and tear during the production process (physical wear and tear) or due to the obsolescence of machines, as well as a decrease in the cost of production in conditions of increasing labor productivity. Physical deterioration fixed assets depends on the quality of fixed assets, their technical improvement (design, type and quality of materials); features of the technological process (cutting speed and force, feed, etc.); the time of their operation (number of days of work per year, shifts per day, hours of work per shift); degree of protection from external conditions (heat, cold, humidity); quality of care and maintenance of fixed assets, and the qualifications of workers.

Obsolescence– reduction in the value of fixed assets as a result of: 1) reduction in the cost of production of the same product; 2) the emergence of more advanced and productive machines. Obsolescence of means of labor means that they are physically suitable, but economically they do not justify themselves. This depreciation of fixed assets does not depend on their physical wear and tear. A physically capable machine may be so obsolete that its operation becomes economically unprofitable. Both physical and moral wear and tear lead to loss of value. Therefore, each enterprise should ensure the accumulation of funds (sources) necessary for the acquisition and restoration of permanently worn-out fixed assets. Depreciation(from Middle - Century Lat. amortisatio repayment) is: 1) the gradual wear and tear of funds (equipment, buildings, structures) and the transfer of their value in parts to manufactured products; 2) reduction in the value of property subject to tax (by the amount of capitalized tax). Depreciation is due to the peculiarities of the participation of fixed assets in the production process. Fixed assets are involved in the production process for a long period (at least one year). At the same time, they retain their natural shape, but gradually wear out. Depreciation is accrued monthly according to established standards depreciation charges. Accrued depreciation amounts are included in the cost of production or distribution costs and at the same time, through depreciation charges, a sinking fund, used for the complete restoration and overhaul of fixed assets. Therefore, correct planning and actual calculation of depreciation contributes to the accurate calculation of product costs, as well as determining the sources and amounts of financing for capital investments and overhaul fixed assets. Depreciable property Property, results of intellectual activity and other objects of intellectual property are recognized that are owned by the taxpayer and are used by him to generate income and the cost of which is repaid by calculating depreciation. Depreciation deductions – accruals with subsequent deductions, reflecting the process of gradual transfer of the cost of means of labor as they wear out physically and morally to the cost of products, works and services produced with their help for the purpose of accumulation Money for subsequent full recovery. They are accrued both on tangible assets (fixed assets, low-value and wear-and-tear items) and on intangible assets (intellectual property). Depreciation charges are made according to established depreciation rates, their amount is established for a certain period for a specific type of fixed assets (group; subgroup) and is expressed, as a rule, as a percentage per year of depreciation to their book value. Sinking fund – source of major repairs of fixed assets, capital investments. It is formed through depreciation charges. Depreciation problem (depreciation) - to allocate the cost of tangible durable assets to costs over their expected useful life based on the use of systematic and rational records, i.e. it is a process of distribution, not evaluation. IN this definition There are several significant points. First, all durable tangible assets, except land, have a limited service life. Because of their limited service life, the cost of these assets must be spread over the years of their operation. The two main reasons for the limited service life of assets are physical wear and tear (obsolescence). Periodic repairs and careful maintenance can keep buildings and equipment in good condition and significantly extend its life, but eventually every building and every machine must fall into disrepair. The need for depreciation cannot be eliminated by regular repairs. Obsolescence represents the process by which assets fall short of modern requirements due to advances in technology and other reasons. Even buildings often become obsolete before they have time to wear out physically. Secondly, depreciation is not a process of assessing value. Even if, as a result of a profitable transaction and specific features of the market situation, the market price of a building or other asset may rise, despite this, depreciation must continue to be accrued (taken into account), since it is a consequence of the distribution of previously incurred costs, and not an assessment. Determining the amount of depreciation for the reporting period depends on: the original cost of the objects; their liquidation value; depreciable cost; expected useful life.

Fixed costs (TFC), variable costs (TVC) and their schedules. Determining total costs

In the short run, some of the resources remain unchanged, and some change to increase or decrease total output.

In accordance with this, short-term economic costs are divided into fixed and variable costs. In the long run, this division becomes meaningless, since all costs can change (that is, they are variable).

Fixed costs (FC)- these are costs that do not depend in the short term on how much the firm produces. They represent the costs of its constant factors of production.

Fixed costs include:

• - payment of interest on bank loans;
• - depreciation deductions;
• - payment of interest on bonds;
• - salary of management personnel;
• - rent;
• - insurance payments;

Variable costs(VC) These are costs that depend on the firm's output. They represent the costs of the firm's variable factors of production.

Variable costs include:

• - wage;
• - fare;
• - electricity costs;
• - costs of raw materials and supplies.

From the graph we see that the wavy line depicting variable costs rises with increasing production volume.

This means that as production increases, variable costs increase:

initially they grow in proportion to the change in production volume (until point A is reached)

then savings in variable costs are achieved in mass production, and their growth rate decreases (until point B is reached)

the third period, reflecting changes in variable costs (movement to the right from point B), is characterized by an increase in variable costs due to a violation of the optimal size of the enterprise. This is possible with an increase in transportation costs due to increased volumes of imported raw materials, volumes finished products which needs to be sent to the warehouse.

Total (gross) costs (TC)- these are all the costs for this moment the time required to produce a particular product. TC = FC + VC

Formation of the long-term average cost curve, its graph

Economies of scale are a long-term phenomenon when all resources are variable. This phenomenon should not be confused with the law of diminishing returns we know. The latter is a phenomenon of an exclusively short-term period, when constant and variable resources interact.

At constant prices for resources, economies of scale determine the dynamics of costs in the long term. After all, it is he who shows whether increasing production capacity leads to decreasing or increasing returns.

It is convenient to analyze the efficiency of resource use in a given period using the LATC long-term average cost function. What is this function? Let's assume that the Moscow government is deciding on the expansion of the city-owned AZLK plant. With available production capacity cost minimization is achieved with a production volume of 100 thousand cars per year. This state of affairs is reflected by the short-term average cost curve ATC1, corresponding to a given scale of production (Fig. 6.15). Let the introduction of new models, which are planned to be released jointly with Renault, increase the demand for cars. The local design institute proposed two plant expansion projects, corresponding to two possible production scales. Curves ATC2 and ATC3 are the short-run average cost curves for this large scale of production. When deciding on the option to expand production, the plant management, in addition to taking into account the financial possibilities of investment, will take into account two main factors: the magnitude of demand and the value of the costs with which the required volume of production can be produced. It is necessary to select a production scale that will ensure that demand is met at minimum cost per unit of production.

ILong-run average cost curve for a specific project

Here, the points of intersection of adjacent short-term average cost curves (points A and B in Fig. 6.15) are of fundamental importance. By comparing the production volumes corresponding to these points and the magnitude of demand, the need to increase the scale of production is determined. In our example, if the demand does not exceed 120 thousand cars per year, it is advisable to carry out production at the scale described by the ATC1 curve, i.e. at existing capacities. In this case, the achievable unit costs are minimal. If demand increases to 280 thousand cars per year, then the most suitable plant would be with the production scale described by the ATC2 curve. This means that it is advisable to carry out the first investment project. If demand exceeds 280 thousand cars per year, it will be necessary to implement a second investment project, that is, expand the scale of production to the size described by the ATC3 curve.

In the long term, there will be enough time to implement any possible investment project. Therefore, in our example, the long-term average cost curve will consist of successive sections of short-term average cost curves up to the points of their intersection with the next such curve (thick wavy line in Fig. 6.15).

Thus, each point on the LATC long-run cost curve determines the minimum achievable unit cost for a given production volume, taking into account the possibility of changes in production scale.

In the limiting case, when a plant of the appropriate scale is built for any amount of demand, i.e. there are infinitely many short-term average cost curves, the long-term average cost curve changes from a wave-like one to a smooth line that goes around all the short-term average cost curves. Each point on the LATC curve is a point of tangency with a specific ATCn curve (Figure 6.16).