Measures of Cost
The Golden Rule
Produce where Marginal Cost and Marginal Revenue intersect.
Average Total Cost
Tells us the cost of a typical unit of output if the total cost is divided evenly over all the units produced. Total cost divided by by the quantity of output.
Marginal Product
the increase in output that arises from an additional unit of input
Total Cost
the market value of of the inpus a firm uses in production. Fixed costs plus variable costs.
Average Fixed Cost
The fixed cost divided by the quanitity of output
Marginal Cost
The increase in total cost that arises from an extra unit of production. Calculated by the change in total cost divded by the change in quantity.
Economies of Scale
The property whereby long-run average total cost falls as the quantity of output increases
Diseconomies of Scale
The property whereby long-run average total cost rises as the quantity of output increases.
Deminishing Marginal Product
The property whereby the marginal product of an input declines as the quantity of the input increases, and marginal cost rises with the quantity of ouptut produced.
Average Variable Cost
The variable cost divided by the quantity of output
Fixed Costs
costs that do not vary with the quantity of output produced
Variable Costs
costs that vary with the quantity of output produced