Econ 10 Cost Curves- introduction - produces as a result of hiring one more worker 3 Short-Run Cost Total Cost A firm’s total cost(TC the cost of all

1 Chapter 10: Main Concepts  Profits  The firm’s input and output in the short run  The firm’s short-run supply curve  Pricing in the long run The Goal: Maximum Profit! The firm objective: profit maximization . Profits=Revenue-Cost=P*Q(P)-TC(Q(P))

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2 Decision Time Frames Short run: the period of time during which at least one of the firm’s inputs is fixed. Long run: the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant. Short-Run Technology Constraint Production function: the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs. Marginal product (of labor): the additional output a firm

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Unformatted text preview: produces as a result of hiring one more worker. 3 Short-Run Cost Total Cost A firm’s total cost (TC): the cost of all the inputs a firm uses in production. Fixed costs (FC): costs that remain constant as output changes. Variable cost (VC): costs that change as output changes. TC(Q) = FC + VC(Q) Short-Run Cost Marginal Cost Marginal cost (MC): the change in the firm’s total cost for producing one more unit of a good or service. Average fixed cost (AFC): fixed costs divided by the quantity of output produced. Average variable cost (AVC): variable costs divided by the quantity of output produced. Average total cost (ATC): total cost divided by the quantity of output produced. ATC(Q) = AFC(Q) + AVC(Q)...
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