microbook_3e-page105

microbook_3e-page105 - Variable cost x depends on the level...

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Costs in the Short Run Fixed cost : x any cost that does not depend on the firm’s level of output. (The firm incurs these costs even if it doesn’t produce any output). x firms have no control over fixed costs in the short run. (For this reason, fixed costs are sometimes called sunk costs) . o obvious examples: property taxes, loan payments, etc. o not-so-obvious example: firm must pay “rent” to hired capital. If that level of capital cannot be adjusted immediately (“fixed factor”), then rental payments are a fixed cost in the short-run
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Unformatted text preview: Variable cost: x depends on the level of production x derived from production requirements and input prices o variable cost rises as output rises because firm has to hire more inputs (kapital and labor) to produce larger quantities of output Costs – Total vs. Average AVC AFC AC (AVC) Cost Variable Avg. (AFC) Cost Fixed Avg. (AC) Cost Avg. Q VC Q FC Q TC VC FC TC (VC) Cost Variable (FC) Cost Fixed (TC) Cost Total . . . . . TC, VC, FC TC=VC+FC FC VC Q AC, AVC, AFC AC=AVC+AFC AFC AVC Q Page 105...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

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