ECON 2005 Lecture Notes - Lecture 15: Diminishing Returns, Marginal Cost, Fixed Cost
Document Summary
There are 4 i(cid:373)porta(cid:374)t (cid:862)types(cid:863) of cost: fixed costs, average fixed costs, variable costs, average variable costs, total cost, average total cost, marginal cost. Average fixed cost declines as quantity rises: variable cost a cost that depends on the level of production chosen (q). Total variable cost curve: this curve embodies information about both factor, or input, prices, and technology. It shows the variable cost of production using the best available technique at each output level given current factor prices. Short run vs long run: short run the period over which the cost of one or more economic inputs is fixed. Long run the period over which all costs are variable. It is a period where new plants can be built, or the firm can decide to get out of the business or exit the industry. In the long run there are no fixed costs.
