Economics 1021A/B Study Guide - Average Variable Cost, Fixed Cost, Marginal Product

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Jeannie Gillmore

Document Summary

At least one factor of production is fixed. In which all factors of production can be changed. Marginal product = change in total product when we increase labour by 1** Average product = change in total / change in labour. When marginal product is above average product average increases. When marginal product is below average product average falls. At max average product marginal product = average product intersect. Tc = tvc + tfc (total variable cost + total fix cost) Tvc increases as output increases as tfc remains constant, tc increases as output increases. Tc/q = tvc/q + tfc/q (q = output) Then we get atc = avc + afc (average total cost = average variable cost + average fix cost) Avg fixed cost downward sloping curve afc = tfc (constant)/q (increasing) have costs regardless of producing or not as q increases curve slopes down. Avg variable cost u shaped law of diminishing returns.