Costs and Production 3 Flashcards
Differentiate between operations in the short run and long run and costs and production (22 cards)
sum of fixed + variable costs at each level of output; cost of all resources used
total cost
costs of all firm’s fixed input (don’t change)
total fixed costs
costs of all firm’s variable inputs (change with output)
total variable costs
Total cost curve has same shape as variable cost curve
cost curves
total fixed and variable costs
total costs
total costs / quantity =
average total costs
change in total costs / change in quantity =
marginal cost
the increase in total cost that results from a one-unit increase in total product
marginal cost
Change in total cost / change in output
marginal cost
____ cost measures can be derived from each of the total cost measures
average cost
total fixed cost per unit of output
average fixed costs
AFC =
TFC / Q
total variable cost per unit of output
average variable costs
AVC =
TVC / Q
total cost per unit of output
average total cost
ATC
TC / Q
ATC =
AFC + AVC
____ costs continually decline as more output is produced per week
average fixed costs
____ cost is the output at which ATC switches from being dominated by AFC to being dominated by rising AVC is the point where average costs are minimal
Minimum average cost
As you hire more workers to produce more, the average total product increases at first, decreasing average variable cost and then decreasing, increasing average variable cost
summary…..
Marginal cost curve intersects ATC curve at ATC minimum point and AVC at its minimum point
…
vertical distance between ATC and AVC curves =
AFC
