ECON 20 Lecture Notes - Lecture 9: Average Variable Cost, Average Cost, Backhoe
Document Summary
Production functions with two variable factors of production: in general, additional capital increases the productivity of labor. Because capital- buildings, machines, and so on is of no use without people to operate it, we say that capital and labor are complementary inputs. Yet it is also true that sometimes machines replace labor for certain types of production. So capital and labor can also be substitutes. Ex: guy running a backhoe and you need a backhoe compliments. Ex: guy and shovel or guy with backhoe substitutes. Fixed costs: any cost that does not depend on the firm"s level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run. Same as total fixed costs, overhead, and sunk costs. Variable costs: a cost that depends on the level of production chosen. Total cost (tc): fixed cost plus variable costs tc = fc + vc.