ECON 10010 Lecture Notes - Lecture 7: Inferior Good, Production Function
Document Summary
Economic pro t = revenue - ex costs - implicit costs. Assumption: size of business is xed - short run. Marginal product of labor - for each additional input put into the production function, how much additional output is produced. Average cost = cost / quantity in production. Marginal cost = change in cost / change in quantity. Features: marginal cost rises - the more and more inputs we put into a factory, the more and more expensive it will be to produce additional units, u-shaped atc curve falls rapidly initially. 1: slows and turns up, avc overtakes afc. Atcatcatcatcatcatcavcavcavcavcavcavcmcmcmcmcmcmcafcafcafcafcafcafc: whenever mc < atc, atc falls. Marginal product rises and then falls: mc eventually rises, and then falls, mc crosses atc curve at minimum atc curve. Long run: can increase size/buy more equipment/open more factories. !5: a long run average total cost curve has 3 regions, in the long run, there is an in nite number of sratc that a.