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