Chapter 11 book notes (11.4, 11.5, 11.6)
Marginal cost
-The change in a firm's total cost from producing one more unit of a good or service. -*Marginal and Average cost* curves * -When marginal costs=average variable cost or average total cost, they must be at their *minimum points.* MC=(change)TC/(change)Q
Long-run average cost curve
A curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed.
Average total cost
ATC= TC/Q also ATC= AFC + AVC
Cost curves that are U-shaped:
Average total cost curve Average variable cost curve Marginal cost curve
Average fixed cost
Fixed cost divided by the quantity of output produced. AFC=FC/Q
Minimum efficient scale
The level of output at which all economies of scale are exhausted.
Constant returns to scale
The situation in which a firm's long-run average costs remain unchanged as it increases output.
Diseconomies of scale
The situation in which a firm's long-run average costs rise as the firm increases output.
Economics of scale
The situation when a firm's long-run average costs fall as it increases the quantity of output it produces.
AVERAGE FIXED COSTS ARE NOT U-SHAPED CURVES
True
In the long run all costs are variable. There are no fixed costs in the long run.
True
In the long run, total cost equals variable cost, and average total cost equals average variable cost.
True
When the marginal product of labor is *rising*, the marginal cost of output is *falling*. When the marginal product of labor is *falling*, the marginal cost of output is *rising*.
True
Average variable cost
Variable cost divided by the quantity of output produced. AVC= VC/Q