ECO 2023 Study Guide - Midterm Guide: Average Variable Cost, Marginal Revenue, Marginal Cost
Document Summary
In economics, the difference between the short run and the long run is that: in the short run at least one input is fixed whereas in the long run no inputs are fixed. {scalc} the law of diminishing marginal product (or returns) states that: as more and more of a variable input, such as labor, is employed to a short-run production process, beyond a point output will increase at a decreasing rate. Suppose a monopoly is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of per unit and is incurring average variable costs of per unit and average total costs of per unit. Given this information, it may be concluded that the firm: is operating at a loss that could be reduced by shutting down.
