9 - Cost Curves

Average product total product divided by the quantity

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: aining the same. Average product: total product divided by the quantity of labor. Short-Run Technology Constraint Law of Diminishing Returns: as a firm uses more of a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually diminishes. Law about the short run. Widget Production function (TPP) Widget Quantity as a function of Labor 80 70 60 Q 50 40 30 20 10 0 0 2 4 6 L 8 10 Widget Production function (MPP) M arginal Physical Product as a function of Labor 16 14 12 MPP 10 8 6 4 2 0 0 2 4 6 L 8 10 Short-Run Cost Total Cost A firm s total cost (TC): the cost of all resources used. Total fixed cost (TFC): the cost of the firm s fixed inputs. Total variable cost (TVC): the cost of the firm s variable inputs. TC(Q) = TFC + TVC(Q) The Costs of Producing Widgets (Table) Q 0 TFC TVC TC AFC AVC ATC 10 0 10 10 10 5 15 1.00 0.50 1.50 22 10 10 20 0.45 0.45 0.91 36 10 15 25 0.28 0.42 0.69 48 10 20 30 0.21 0.42 0.63 58 10 25 35 0.17 0.43 0.60 66 10 3...
View Full Document

This note was uploaded on 02/22/2013 for the course ECON 001 taught by Professor Stein during the Spring '07 term at UPenn.

Ask a homework question - tutors are online