Ch 11 Outputand Costs

33 4 d b maximum ap e f ap 2 mp 0 1 2 3 4 5 labour

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Unformatted text preview: 0 1 2 3 4 5 Labour Short Run Costs Total Cost sum of the costs of all the inputs used Fixed Cost cost of a fixed input, does not change with output Variable Cost cost of a variable input, changes with output Marginal Cost the increase in the total cost by making one more thing Total and Marginal Cost Total Total fixed variable Total Marginal cost cost cost cost Labour Output (workers (pizzas per day) per day) (TFC) (TVC) (dollars per day) (TC) 25 50 75 100 125 150 (MC) 6.25 4.17 8.33 12.50 25.00 a b c d e f 0 1 2 3 4 5 0 4 10 13 15 16 25 25 25 25 25 25 0 25 50 75 100 125 Total Costs Cost 150 TC TVC 100 50 TFC 0 5 10 15 Q Average Cost Average fixed cost (AFC) is total fixed cost per unit of output. Average variable cost (AVC) is total variable cost per unit of output. Average total cost (ATC) is total cost per unit of output. Marginal Cost and Average Costs Cost 15 MC ATC 10 AVC 5 AFC 0 5 10 15 Output Average Cost TC = TFC + TVC TC TFC TVC = + Q Q Q OR ATC = AFC + AVC Costs Avg. Total Total Avg. Avg. fixed variable Total Marginal fixed var...
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