Short run cost

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Intros
Lessons
  1. Short Run Cost Overview:
  2. Total Cost
    • Cost of all factors of production
    • Separated into two types of costs
    • Total fixed cost
    • Total variable cost \, \, TVC
    • TC = TFC + TVC
    • How it graphically looks
  3. Marginal Cost & Average Cost
    • Marginal cost = increase  in  total  outputincrease  in  output\large \frac{increase\; in\; total\; output}{increase\; in\; output}
    • Average fixed Cost: total fixed cost per unit of output
    • Average Variable Cost: total variable cost per unit of output
    • Average Total Cost: Total cost per unit of output
    • ATC = AFC + AVC
    • How it graphically looks
    • Why are they U-Shaped?
  4. Shifts in Cost Curve
    • Technological change lowers cost \, \, shift total cost downward
    • TC \, \downarrow \, , TFC \, \uparrow \, , and TVC \, \downarrow \,
    • Increase in Factor of Production prices \, \, shift total cost upward
    • Case 1: TC \, \uparrow \, , TFC \, \uparrow \, , AFC \, \uparrow \, , but TVC, AVC, MC unchanged
    • Case 2: TC \, \uparrow \, , TVC \, \uparrow \, , AVC \, \uparrow \, , MC \, \uparrow \, but TFC, AFC unchanged
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Examples
Lessons
  1. Graphing Total Cost, Total Fixed Cost, & Total Variable Cost
    Consider the following information:

    Labor (workers)

    Output (chocolate bars)

    1

    20

    2

    50

    3

    100

    4

    120

    5

    130

    6

    135


    Suppose it costs $100 to hire a worker, and the total fixed cost is $200. Graph the TC, TFC, and TVC curve.
    1. Consider the following information: 

      Labor (workers)

      Output (chocolate bars)

      1

      30

      2

      60

      3

      120

      4

      150

      5

      160

      6

      165


      Suppose it costs $150 to hire a worker, and the total fixed cost is $200. Graph the TC, TFC, and TVC curve.
      1. Calculating Average Total Cost, Fixed Cost, Variable Cost & MC
        Consider the following information:

        Labor (workers)

        Output (chocolate bars)

        1

        20

        2

        50

        3

        100

        4

        120

        5

        130

        6

        135


        Suppose it costs $100 to hire a worker, and the total fixed cost is $200. Calculate the ATC, AFC, TVC, and MC curve, and graph.
        1. Understanding Shifts in Cost Curves
          Suppose a firm rents a building, and the rent increases by $300. How would it impact the TC, TVC, TFC, ATC, AVC, AFC, and MC curve?
          1. Suppose a firm decreases the wage of workers. How would it impact the TC, TVC, TFC, ATC, AVC, AFC, and MC curve?