EC120 Chapter Notes - Chapter 13: Average Cost, Production Function, Marginal Cost
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EC120 Full Course Notes
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Analyze the links between a production process and cost. Learn the meaning of average total cost and marginal cost. Examine the difference between short and long-run cost curves. Eco(cid:374)o(cid:373)ic costs are(cid:374)"t the sa(cid:373)e as accou(cid:374)ti(cid:374)g costs. Relationship between quantity of inputs used to make a good, and quantity of output of that good. The instantaneous slope increases at a decreasing rate, increases by a smaller amount each time. Increase in output from an additional unit of input. Increases at an increasing rate, as output goes up, cost to produce goes up. Marginal costs: cost of the last unit produced. Graph looks like a u, at optimal output, cost is lowest, as output is greater or less the cost is higher. Efficient scale is the quantity of output that minimizes average total cost. The most optimal output, the bottom of the u. Costs are fixed in short, not in long run.