Economics 1021A/B Chapter Notes -Average Variable Cost, Marginal Product, Marginal Cost

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24 Apr 2012
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ECON 1021A/B Full Course Notes
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ECON 1021A/B Full Course Notes
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People who operate firms make many decisions, and all of their decisions are aimed at achieving one overriding goal: maximum attainable profit. All types of firms in all types of markets make similar decisions about how to produce. The actions that a firm can take to influence the relationship between output and cost depends on how soon the firms want to act. A firm that plans to change its output rate tomorrow has fewer options than one that plans to change its output rate six months or six years from now. To study the relationship between a firm"s output decision and its costs, we distinguish between two decision time frames: The short run us a time frame in which the quantity of at least one factor of production is fixed. For most firms, capital, land, and entrepreneurship are fixed factors of production and labour is the variable factor.