ECON 1000 Lecture Notes - Lecture 11: Average Variable Cost, Average Cost, Sunk Costs

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Gordana Colby

Document Summary

Every firm must: decide how much to produce, how many people to employ, how much and what type of capital equipment to use. Increase in the amount of labour employed = increase output in the short run. As quantity labour employed increases: total product increases, marginal product increases initially but eventually decreases, average product increases initially but eventually decreases. Below = attainable output: marginal product curve, change in total product, curve derived from total product curve, mpc passes through the mid-points of the bars, increasing marginal returns initially, diminishing marginal returns eventually. Diminishing marginal returns arises: less access to capital, less space to work. More output = employ more labour = more costs. Variable costs do change with output: tc = tfc + tvc, the total cost curves. Total fixed cost: same at each output level. Total variable cost: cost increases as output increases.