3.2 Short-Run Production Costs

• What does short-run production refer to?

  One input remains fixed
• Short-run production involves at least one input that remains fixed
• Fixed costs are associated with resources that cannot be easily adjusted in the short run.
• What is an example of a variable input in short-run production?

  Labor
• What is an example of a fixed cost in short-run production?

  Rent
• Variable costs change with the level of production.
• In the short run, at least one input used in production remains fixed
• What type of costs are associated with fixed inputs in the short run?

  Fixed costs
• What is an example of a variable cost in short-run production?

  Raw materials
• The total cost in the short run is the sum of fixed and variable costs.
• What is an example of a fixed cost in the short run?

  Insurance
• Fixed costs do not change with the level of production
• Match the cost type with its definition:

  Fixed Costs ↔️ Do not vary with production

  Variable Costs ↔️ Change with production
• Variable costs remain constant regardless of the level of production.

  False
• Why can a bakery not increase oven size in the short run?

  It is a fixed input
• Fixed costs in the short run include expenses like rent
• Order the steps in calculating total costs in the short run:

  1️⃣ Identify fixed costs

  2️⃣ Identify variable costs

  3️⃣ Add fixed and variable costs
• What is an example of a variable cost for a bakery?

  Flour
• The rent for a bakery space is a fixed cost that remains constant regardless of the number of pastries produced.
• Fixed Costs do not change with the level of production
• What is the formula for calculating total costs (TC)?

  $TC =$$FC +$$VC$
• Match the cost type with its definition:

  Fixed Costs ↔️ Costs that do not vary with production

  Variable Costs ↔️ Costs that change with production
• Fixed costs remain constant regardless of output.
• Variable costs change directly with the level of production
• Rent and insurance premiums are examples of fixed costs.
• What is the formula for total costs (TC)?

  $TC =$$FC +$$VC$
• Average Total Cost (ATC) is the total cost of production divided by the number of units produced
• What is the formula for calculating Average Total Cost (ATC)?

  $ATC =$$\frac{TC}{Q}$
• Average Variable Cost (AVC) measures the cost of producing each unit, considering only variable costs.
• The formula for Average Variable Cost (AVC) is $AVC =$$\frac{VC}{Q}$
• If the total variable costs (VC) for a bakery are $500$ and the quantity produced (Q) is 100 pastries, what is the AVC per pastry?


  $5$
• Arrange the following steps in the order they occur in short-run production:

  1️⃣ At least one input remains fixed

  2️⃣ Other inputs can vary

  3️⃣ Producers adjust variable inputs
• Fixed costs do not change with the level of production in the short run.
• What is the formula for calculating total costs (TC)?

  $TC =$$FC +$$VC$
• Match the cost type with its example:

  Fixed Costs ↔️ Rent

  Variable Costs ↔️ Wages
• What happens to variable costs as production increases?

  They increase
• Total costs are the sum of fixed costs and variable costs.
• The formula for total costs is $TC =$$FC +$$VC$.
• Give an example of a fixed cost.

  Rent
• Give an example of a variable cost.

  Wages