relationship between cost curves
on productivity graph
Labor (L) on horizontal axis Quantity (Q) on vertical axis
Total fixed cost vs. Average fixed cost
TFC doesn't respond to change in Q AFC always decreases as Q increases No relationship between AFC and MC
relationship between marginal physical product and total product
TP increases as MP>0 TP decreases as MP<0 TP no change when MP =0 (maximum)
relationship between average total cost and marginal cost
if MC>ATC, ATC increase if MC<ATC, ATC decrease if MC = ATC, ATC no change, at minimum value
relationship between marginal physical product and average physical product
AP increases as MP >AP AP decreases as MP<AP TP no change when MP =AP (maximum)
relationship between Average Variable Cost and Marginal Cost
AVC decreases when MC<AVC AVC increases when MC>AVC AVC no change when MC=AVC (minimum)
Marginal product can be negative
average physical product can't be negative
Why total variable cost increases as quantity increase
firm must add more variable resources to increase output. Diminishing marginal productivity
The average physical product continues to increase as long as
marginal physical product is greater than the average physical product
Total fixed cost
not related with quantity.
Total product increases as the firm adds more unit of labor as long as
the marginal physical product is positive
relationship between Average physical product and average variable cost
when APP increases, AVC decrease when APP decreases, AVC increase AVC minimized when APP at maximum
relationship between Marginal physical product and marginal cost
when MPP increases, MC decrease When MPP decreases, MC increase MC of producing minimized when MPP is at its maximum.
