3.3.2 - costs

• Average product = total product/ quantity of inputs
• Marginal product = change in product / change in quantity of inputs
• Total varibale costs = VC per unit x output
• Total cost = total variable costs + total fixed costs
• Average costs = Total costs / quantity
• Average variable costs = total variable costs / quantity
• Average fixed costs = total fixed costs / quantity
• marginal costs = change in total costs / change in quantity
• Short - run production is the time period in which a minimum of one factor of production is fixed
• Long - run production is the time period in which no factors of production are fixed.
• Short - run: the law of diminishing returns states that if one factor of production is increased whilst another factor is fixed the productivity of the variable factor will eventually decrease.
• Marginal cost initially decreases because an output increases and more workers are hired. They can specialise increasing productivity and decreasing marginal cost. But magical costs will then increase because diminishing marginal returns will decrease productivity, increasing marginal cost.