Production cost and competition

Concept of Production¶

Total Production = All output

Slope of Total Production = Marginal Production

$Marginal\ Product = \dfrac{\Delta output}{\Delta input}$

$Average\ Product = \dfrac{Total\ Product}{Quantity\ of\ Factors\ of\ Production}$

MP, AP is associated with Input Usage and Product Changes

Law of Diminishing Marginal Product¶

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

Short-Run Production Cost¶

$Total\ Cost = Total\ Fixed\ Cost + Total\ Variable\ Cost$

$Average\ Total\ Cost = AFC + AVC = \dfrac{Total\ Cost}{Quantity}$

$Average\ Fixed\ Cost = \dfrac{Fixed\ Cost}{Quantity\ of\ Output}$

$Average\ Variable\ Cost = \dfrac{Variable\ Cost}{Quantity\ of\ Output}$

Comments