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Unit 3 - Coggle Diagram
Unit 3
The Production Function
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The production function explains the relationship between inputs and outputs both in the short run and the long run.
The total product curve
how the quantity of output depends on the quantity of the variable input, for a given quantity of the fixed input
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Types of Profit
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Total cost
a firm’s cost of production includes all the opportunity
costs of making its output of goods and services
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Implicit costs do not require an outlay of money. They are measured by the value, in dollar terms, of the benefits that are forgone.
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Profit Maximization
Optimal output rule
a firm’s profit is maximized by producing the quantity of output at which the marginal cost of the last unit produced is equal to the marginal revenue
Production is profitable when the firm’s optimal quantity
of output at the market price results in (at least) a normal profit
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