Econ ch 13

Cindys car wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output. The firm's total cost is

$500

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th worker is

10 units of output

Average total cost (ATC) is calculated:

ATC= total cost / quantity output

total cost can be divided into two types

fixed costs and variable costs

when adding another unit of labor leads to an increase in output that is smaller than the increases in output that resulted from adding previous units of labor, the firm is experiencing

diminishing marginal product

the marginal product of labor is equal to the

increase in output obtained from a one unit increase in labor

In the long run

inputs that were fixed in the short run become variable

Economists normally assume that the goal of a firm is to

maximize its profit

for a firm the production function represents relationship between

quantity of inputs and quantity of outputs