Flashcards in Short-Run Costs 7.3-3- Marie Smith Deck (12):
What is the marginal cost of production?
It is the additional cost incurred when a firm produces an extra unit of output.
Define marginal cost mathematically.
It is the change in variable cost divided by the change in production (output)
How do you find the change in total product?
Find two point on the total product schedule and find the difference in output.
How do you find the change in variable cost?
Find the difference in variable costs when increasing production from one amount to another.
When you find the MC for each increase in production you get an entire range of marginal costs. In the lower ranges are costs increasing or decreasing?
Marginal costs are decreasing in the lower ranges.
Why does MC decrease in the lower ranges?
As you add workers, teamwork and specialization reduce the cost for producing another unit.
Why does MC increase?
MC increases because of congestion and decreasing productivity.
Changes in MC are always the result of what?
Changes in MC are always the result of changes in productivity.
How are productivity and cost related?
They are inversely related.
When productivity goes up what happens to cost?
Cost goes down.
When Labor productivity is decreasing what happens to marginal cost?
Marginal cost goes up.