ECON 1B03 Lecture Notes - Lecture 4: Fixed Cost, Variable Cost
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24 Jun 2018
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-Whenever MP is greater than AP, AP is increasing
-Whenever MP is less than AP, AP is decreasing
Short Run Costs of Production
Costs of Production
- Of course, Jerry our TV assembler is concerned about his costs of production
Types of Costs
-Fixed Costs: costs that do not vary with the quantity of output produced
oExample: rent, loan payments, salaried staff
-Variable Costs: costs that do vary with the output produced
oExample: labour costs, raw material costs
Total Cost = Total Fixed Cost + Total Variable Cost
- If there are fixed costs, the time period must be the SR
Short Run Example
- Suppose Jerryās fixed costs are $200 per week
- His only variable cost is his labour cost
oHe pays each worker $500 per week
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