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Chapter 13

EC120 Chapter 13 and 14 Notes.docx

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Department
Economics
Course
EC120
Professor
Rizwan Tahir
Semester
Fall

Description
CHAPTER 13 ECON NOTES.  All costs can vary in the long-run  An example of explicit costs are the payments made by the firm to others  An example of implicit costs is the opportunity cost of resources owned by the firm  A firm’s economic profit is equal to the difference between its revenues and its opportunity costs  Variable cost in the short-run: a new wing on the plant (?)  What best characterizes fixed costs is that they are costs that do not vary with output  Marginal cost is the increase in total cost that arises from an extra unit of production.  Economies of scale explain why average cost declines in the long run  As production increases, a unit’s share of fixed costs continually decreases as output increases (… doesn’t it stay constant??)  Average cost is best defined as TC / Q  Marginal cost equals ATC at its min  The marginal product is essentially the additional unit of output per unit of input Describe the relationship between diminishing marginal product and marginal cost.
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