ECON 247 Lecture Notes - Lecture 13: Lemonade, Marginal Cost, Average Variable Cost

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31 Jul 2018
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The production function the relationship between quantity of inputs used to make a good and the quantity of output of that good. (1 worker = 50 cookies, 2 workers = 90 cookies, etc. ) Marginal product the increase in output that arises from an additional unit of input. Marginal cost the increase in total cost that arises from an extra unit of production (change in total cost/change in quantity: cost curves and their shapes. Rising marginal cost - thirsty thelma"s marginal cost rises with the quan- tity of output produced. This reflects the property of diminishing marginal product. When thelma is producing a small quantity of lemonade, she has few workers and much of her equipment is not being used. Because she can easily put these idle resources to use, the marginal product of an extra worker is large, and the marginal cost of an extra glass of lemonade is small.

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