ECO 304K Lecture Notes - Lecture 7: Diminishing Returns, Average Variable Cost, Sunk Costs

• School: UT-Austin
• Department: Economics
• Course: ECO 304K
• Professor: Hickenbottom Wayne

Document Summary

Quantity and combination of inputs needed to produce product. How to product output (which technique to use) is fixed in the short run. Fixed cost (page 165): any cost that does not depend on the firm"s level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run. Same as total fixed cost, overhead, and sunk costs. Variable cost (page 165): a cost that depends on the level of production chosen. Total cost (tc): fixed costs plus variable costs. Total fixed cost (tfc) or overhead (page 166): the total of all costs that do not change with output even if output is zero. Average fixed cost (afc: page 166): total fixed cost divided by the number of units of output; a per-unit measure of fixed costs. Afc = tfc/q, where q is the amount of output.