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ECON 2-28-2011

# ECON 2-28-2011 - (AKA overhead o Typical fixed costs...

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ECON 2-28-2011 15:17 Chapter 12     Factors of Production/Inputs Fixed: factory and safety equipment Defined them already Variable:  Labor, paper, ink Production function: relationships between inputs and outputs TP:  Total Product MP:  Marginal Product Production Time Horizon o Long Run: the time period in which all factors are variable Factor usually most fixed: building, capital, land o Short Run: the time period in which at least one input is fixed Diminishing marginal returns to an input o Increase in one input leads to a decline in the marginal product for that  input. (region where the MP is decreasing) Types of costs Fixed Costs (FC): costs that do not depend on the quantity of output produced

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Unformatted text preview: (AKA overhead) o Typical fixed costs include the building or land • Variable Costs (VC): costs that depend on the quantity of output produced T o ypical variable costs include labor and material Total Costs • (TC): total costs o TC = FC + VC o Stating the obvious: TC is very much related to FC and VC Marginal Cost • The change in total cost for producing one more unit of output o Marginal refers to “one more” o MC= ∆ TC/ ∆ Q Average Cost • TC, VC, FC o Take each of these and divide by Q (quantity of output) = Average ATC AVC AFC o ATC=AVC + AFC AFC: downward sloping 15:17 15:17...
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