{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

EC 201 10-8-08

# EC 201 10-8-08 - E C 201 Goal How does firm choose Q of...

This preview shows pages 1–3. Sign up to view the full content.

EC 201 10-8-08 Goal: How does firm choose Q of output? Firm’s goal: maximize profit Profit= total revenue-total cost Total cost=total fixed cost + total variable cost Fixed costs: costs of fixed inputs Variable costs: cost of variable inputs As Q ↑, fixed costs don’t change As Q↑ , variable costs ↑ “short run” = period short enough that at least one input is fixed Q TFC AFC =(fixed cost per unit TFC/Q) 1. \$1000 - 2. 1000 1000 3. 1000 500 4. 1000 333 1/3 5. 1000 250 1000 1000 Marginal cost=extra cost to produce one extra unit = ∆TVC/∆Q usually ∆Q = 1 Remember relationship between marg. + avg. If marg. > avg., avg. ↑ → if avg. ↑, must be marg. >avg. If marg. = avg. , avg. constant If marg. < avg. , avg. ↓

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
TC= TFC + TVC divide by Q TC/Q = TFC/Q + TVC/Q ATC=AFC+AVC AFC is vertical distance between ATC+AVC Standard short-run cost curves o US govt. almost certainly will not default o Treasury bill is safe investment
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

EC 201 10-8-08 - E C 201 Goal How does firm choose Q of...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online