ECON101 Chapter Notes - Chapter 10: Ceteris Paribus, Average Cost, Average Variable Cost

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: wokiakumase

Document Summary

Decision time frames: biggest decision entrepreneurs make is which industry to set up a firm. Irrelevant to the firm"s current decisions: the only costs that influence current decisions are short-run costs of changing labour and long- run costs of changing its plant. Increase in output of three units appears as the marginal product of going from 2 to 3 workers: plot the marginal product at the midpoint between 2 and 3 workers. Short-run cost: total cost, total cost (tc) - the cost of all the factors of production the firm uses, total fixed cost (tfc) - the cost of the firm"s fixed factors, e. g. Increase in total cost divided by the increase in output. As output increases, the same constant total fixed cost is spread over a larger output: average variable cost (avc) Parabola shaped: tc = tfc + tvc, divide each terms by quantity, q. Short-run and long-run cost: each short-run atc is u-shaped.