Marginal Utility and Marginal Costs
Economic costs
Accounting (dollar) costs plus any opportunity costs
Law of Diminishing Marginal Utility
As each extra good is consumed the extra satisfaction gained falls
Diminishing Returns
As more of a variable factor of production is added to production when at least one factor is fixed, at some point the increase in production added starts to fall
Increasing Returns
As production rises, efficiency gains are made causing marginal costs to fall
Optimal purchase rule
Consumers will buy a product up to the point where MU = price
Variable costs
Costs that change as output changes
Fixed costs
Do not change when output increases or decreases
A firm's supply curve is which cost curve?
Mc above the minimum AVC
Shutdown point / price
The price equal to the minimum AVC
Breakeven point
The price where average costs equal average revenue
Average Cost
Total cost / output
Average variable cost
Total variable Cost / output
Calculating marginal cost
the change in total cost when one more of a product is produced.
Marginal Cost
the extra cost of producing one additional unit of a good or service
Marginal Utility
the extra satisfaction gained from consuming one additional good
The bottom of the AC and AVC curves is always
where the curves intersect the MC curve
