1 / 8

ECN 3100

ECN 3100. Chapter 13 The Costs of Production (summary & conclusion). The Production Function. Q output. Marginal Product the increase in output because of an additional unit of input. Diminishing Marginal Product

yahto
Download Presentation

ECN 3100

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. ECN 3100 Chapter 13 The Costs of Production (summary & conclusion) Chapter 13 (concl.)

  2. The Production Function Q output • Marginal Product • the increase in output because of an additional unit of input. • Diminishing Marginal Product • “the marginal product (MP) of an input declines as the quantity of the input increases” • MP positive, TP increases • MP = 0, TP maximum • MP negative, TP decreases TP Q input (i.e. Q labour) MP Chapter 13 (concl.)

  3. Total Costs Curves • TC = TFC + TVC • TC begins at positive TFC value and increases with the quantity of output produced, parallel to TVC. • TVC begins at 0 value and increases with the quantity of output produced. • TFC remains constant at a positive value. Cost TC TVC TFC Q output Chapter 13 (concl.)

  4. Average Costs Curves Cost MC < ATC, ATC decreases MC = ATC, ATC minimum MC > ATC, ATC increases MC < AVC, AVC decreases MC = AVC, AVC minimum MC > AVC, AVC increases AFC decreases with quantity of output produced. MC ATC AVC AFC Q output Chapter 13 (concl.)

  5. Short-run Costs vs Long-run Costs Cost SRAC7 SRAC6 SRAC1 SRAC2 SRAC3 SRAC4 SRAC5 LRAC Q output Chapter 13 (concl.)

  6. Short-run Costs vs Long-run Costs Cost SRAC Firm 3 SRAC Firm 1 SRAC Firm 2 LRAC Constant Returns to Scale Diseconomies of Scale Economies of Scale Q output Chapter 13 (concl.)

  7. Short-run Costs vs Long-run Costs Cost LRAC Diseconomies of Scale = Increasing Returns to Scale Economies of Scale = Decreasing Returns to Scale Constant Returns to Scale Q output Chapter 13 (concl.)

  8. Short-run Costs vs Long-run Costs • Economies of scaleLRAC decreases as Qoutput increases (decreasing returns to scale). • Diseconomies of scaleLRAC increases as Qoutput increases (increasing returns to scale). • Constant returns to scaleLRAC remains constant as Qoutput increases. Chapter 13 (concl.)

More Related