# ECO101H1 Lecture Notes - Average Variable Cost, Marginal Cost, Fixed Cost

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13 Nov 2013
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## Document Summary

Production function: relates output to quantity of inputs (capital, labour) Short - run : one input (capital) is fixed, while one input (labour) can vary. Long - run : all inputs (capital, labour) can vary. Short run: gm can vary amount of labour (overtime, lay-offs) Long run: gm can vary number of plants and amount of labour. Product schedules (short - run) (tp) total product total output, given labour input (mp) marginal product* increase in total output divided by increase in labour input. Law of diminishing returns: the marginal product of a variable input, in the presence of a fixed input, eventually diminishes. Note: if mp is above ap, ap is rising; if mp is less than ap, ap is falling. As number of farm workers increases, the amount of land available to each worker falls, and marginal product of additional farm workers eventually falls. Total of all costs (tc = tfc + tvc)