ECON 1B03 Lecture Notes - Lecture 8: Marginal Cost, Marginal Product, Marginal Revenue

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31 May 2016

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ECON 1B03 Full Course Notes

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Information: the quantity of output to supply, how to produce that output, the quantity of each input to demand, the price of output, techniques of production available, the price of inputs. Two conditions hold in the short run: fixed factor of production, firms can"t enter/exit. Fixed costs are those that a firm bears in the short run that doesn"t depend on its output level. Incurred even if the firm is producing nothing. No fixed costs in the long run. Variable costs are any that a firm bears that depends on the level of production chosen. Total costs are fixed costs plus variable costs. Include heating, lease payments, insurance, taxes, etc. Certain forms of capital can be variable in the short run (employees, computers, etc. ) Firms have no control over fixed costs in the short run. Is the total fixed cost divided by the number of units of output (q)

Related Questions

A basic distinction between the long run and the short run is that:

A) If a firm produces no output in the long-run, it still incurs a loss.

B) The opportunity costs of production are lower in the short-run than in the long-run.

C) In the long-run some inputs are fixed, while in the short-run all inputs are variable.

D) In the short-run, complete adjustment of all inputs is impossible, while in the long-run all inputs can be adjusted.

bronzellama426

1. Theoretically, in a long-run cost function:

a. all inputs are fixed

b. all inputs are considered variable

c. some inputs are always fixed

d. capital and labor are always combined in fixed proportions

2. The short-run cost function is:

a. where all inputs to the production process are variable

b. relevant to decisions in which one or more inputs to the production process are fixed

c. not relevant to optimal pricing and production output decisions

d. crucial in making optimal investment decisions in new production facilities

3. Break-even analysis usually assumes all of the following except:

a. in the short run, there is no distinction between variable and fixed costs.

b. revenue and cost curves are straight-lines throughout the analysis.

c. there appears to be perfect competition since the price is considered to remain the same regardless of quantity

d. the straight-line cost curve implies that marginal cost is constant.

maroonllama628

Consider Patâs Pizza Restaurantâs production decision in both the short-run and longârun. Pat wants to improve the productivity of the firm in the long run. Explain the types of input costs that might be fixed in the shortârun and types of costs that may be variable in the longârun. Provide examples for fixed inputs and variable inputs as well as fixed costs and variable costs for the Restaurant in the short run. What long run economic decisions should Pat make to increase productivity, minimize costs, and maximize profit?

Marginal Product of Capital	4,000
Marginal Produce of Labor	100
Wage Rate	$10
Rental Price of Pizza Ovens	$500

ECON 1B03 Lecture Notes - Lecture 8: Marginal Cost, Marginal Product, Marginal Revenue

ECON 1B03 Full Course Notes

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