ECON 101 2Midtermreview

Temporary shutdown decision if the firm makes an

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: eversed. A sunk cost is a cost incurred by the firm and cannot be changed. If a firm’s plant has no resale value, the amount paid for it is a sunk cost. Sunk costs are irrelevant to a firm’s current decisions. To increase output in the short run, a firm must increase the amount of labour employed. Three concepts describe the relationship between output and the quantity of labour employed: 1. Total product 2. Marginal product 3. Average product Product Schedules Total product is the total output produced in a given period. The marginal product of labour is the change in total product that results from a one- unit increase in the quantity of labour employed, with all other inputs remaining the same. The average product of labour is equal to total product divided by t...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online