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The Costs of Production (The various measures of Cost (Average cost…
The Costs of Production
Revenue, Costs, and Profit
Opportunity costs
Explicit costs
Implicit costs
Economic profit
Accounting profit
The Production function
Q of inputs and Q of output
Marginal product
"Think at the margin"
Diminishing marginal product
The various measures of Cost
Marginal cost
"Think at the margin"
Fixed and Variable costs
(Do not vary vs vary with Q of output)
Average cost
Average total cost (ATC)
Average fixed cost (AFC)
Average variable cost (AVC)
The shape of cost curves
Rising MC
U-Shaped ATC
MC and ATC
MC < ATC: ATC is falling
MC > ATC: ATC is rising
MC crosses ATC: ATC is at minimum
Efficient scale
Costs in the Short Run and in the Long Run
Some inputs are fixed vs All inputs are variable
Economies and Diseconomies of Scale
Economics of Scale
(Q increases => ATC falls)
Constant Return to Scale
(Q increases => ATC stays the same)
Diseconomies of Scale
(Q increases => ATC rises)
Vietnam-Netherlands Programme - 2017
Do Huu Luat