Economics: Short Run production
Total Variable Cost (TVC)
the total of all costs that vary with output in the short run (increase as production increases)
Average Total Cost (ATC)
total costs divided by quantity of output or Average fixed cost+ Average variable cost
Average Fixed Cost (AFC)
total fixed costs divided by quantity of output
Total Cost (TC)
total fixed costs plus total variable costs
Average Variable Cost (AVC)
total variable costs divided by quantity of output
Marginal product
The change in total output when another unit of a variable input is added Marginal Product= Change in Total Product/ Change in input
Total Product
The max total output that can be made from a inputs
variable costs
costs that vary with the quantity of output produced
Shutdown Rule
A firm should shutdown if and only if P is less than Average variable cost. The reasoning is you could lose more money by shutting down because you need to pay fixed cost regardless.
short run production
A time period so short that a firm is unable to vary some of its factors of production. The firm's plant size typically cannot be altered in the short run.
Average Product
Amount of output per unit of a variable input Average product= Total product/ # of input
Total Fixed Cost (TFC)
Costs that do not vary as output varies and that must be paid even if output is zero. These are payments that the firm must make in the short run, regardless of the level of output.
fixed costs
Costs that do not vary with the quantity of output produced
long run production
a time period long enough to allow the firm to vary all of its factors of production (can change capacity)