ECO10004 Lecture Notes - Lecture 4: Fixed Cost, Marginal Cost, Variable Cost
Document Summary
When firms analyse the relationship between their level of production and their costs, they separate the time period involved into the short run and long run. Technology: the processes a firm uses to turn inputs into outputs of goods and services. For example, using an expresso machine and coffee beans to produce coffee to sell to customers. Technological change: change in the ability of a firm to produce output with a given quantity of inputs. Short run is based on the law of diminishing returns, which details the period of time during which at least one of the fir(cid:373)s" inputs is fixed. This helps to explain why marginal costs rise as quantity increases. In the short run, one of the firms input is fixed, which compares to the long run in which the firm varies all of its inputs. The difference between fixed cost and variable cost. Total costs: the cost of all the inputs a firm uses in production.
