Economics CFA

Past expenditure on a plant that has no resale value

• 1) Total product
• 2) Marginal product
• 3) Average product
• These concepts can be illustrated by product schedules or product curves

• 1) the maximum output that a given quantity of labor can produce
• 2) the increase in total product that results from a one-unit increase in the quantity of labor employed with all other inputs remaining the same
• 3) total product divided by the quantity of labor employed - tells how productive workers are on the average

As a firm uses more of a variable factor of production, with a given quantity of the fixed factor of production, the marginal product of the variable factor eventually diminishes.

• 1) Total cost
• 2) Marginal cost - an increase in total cost from a one-unit increase in output (increase in total cost/increase in output)
• 3) Average cost - U shape comes from spreading total fixed cost over a larger output and eventually diminishing returns

• 1) technology
• 2) price of factors of production

change in the total product divided by the change in capital when the quantity of labor is constant

• relationship between the lowest attainable average total cost and output when both the plant size and labor are varied.
• tells firm plant size and quantity of labor to use at each output to minimize cost

features of a firm's technology that lead to rising long-run average cost as output increases

features of a firm's technoogy that lead to constant long-run average cost as output increases. when constant returns to scale are present the LRAC curve is horizontal.

the smallest quantity of output at which long-run average cost reaches its lowest level