To start with, the model assumes the firm is already operating as efficiently as possible. If we assume the firm is in fact is in fact operating as best it can with state-of-the art technology, then the only possibility to reduce cost in the short run is for the inputs to decrease in price. If this were to happen, there would be a downward shift in the firm’s short-run cost curves. This effect is shown in Figure 7.3a and b. Notice that a reduction in the firm’s fixed cost (e.g., a reduction in rental payments) would simply cause the average cost line to wage rates or raw materials costs) would cause all three cost lines-AC, AVC, and MG-to shift. MG actually shifts downward and to the right.