ECON 101 2Midtermreview

Only one of them is a long run equilibrium because

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Unformatted text preview: al product of the variable input eventually diminishes. When marginal product exceeds average product, average product increases. When marginal product is below average product, average product decreases. When marginal product equals average product, average product is at its maximum. To produce more output in the short run, the firm must employ more labour, which means that it must increase its costs. We describe the way a firm’s costs change as total product changes by using three cost concepts and three types of cost curve: Total cost Marginal cost Average cost Total Cost A firm’s total cost (TC) is the cost of all resources used. Total fixed cost (TFC) is the cost of the firm’s fixed inputs. Fixed costs do not change with output. Total variable cost (TVC) is the cost...
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