Economics 1021A Chapter 11

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

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Unformatted text preview: 4 5 Labour Average Product AP, MP 6 c 4.33 4 Maximum d AP e b f AP 2 MP 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) a b c d e f 0 1 2 3 4 5 0 4 10 13 15 16 (TFC) (TVC) (TC) (MC) (dollars per day) 25 25 25 25 25 25 0 25 50 75 100 125 25 50 75 100 125 150 6.25 4.17 8.33 12.50 25.00 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...
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