ProductionRelationshipsAddition - 1 L AP w AVC = Proof L AP...

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The following two relationships link the discussion of costs with the discussion of production. Both relationships hold in a situation where the only variable input to production is labor, and the labor market is competitive (for now this will always hold). Both are frequently used in past exams and thus are good to know.
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Unformatted text preview: 1. L AP w AVC = Proof: L AP w Q wL Q VC AVC = = = 2 . L MP w MC = Proof: L MP w Q L w Q wL Q VC Q VC FC Q TC MC = Δ Δ = Δ Δ = Δ Δ + = Δ + Δ = Δ Δ = ) ( ) ( * Courtesy of Brian Kovak...
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