- •2. When is the pursuit of self-interest in the social interest?
- •11. A Change in the Quantity Demanded Versus a Change in Demand
- •13. A Change in the Quantity Supplied Versus a Change in Supply
- •14. Market Equilibrium
- •16. Demand and Supply Change in the Same Direction
- •17. Demand and Supply Change in the Opposite Directions
- •18. Price Elasticity of Demand
- •19. Inelastic and Elastic Demand
- •21. Cross Elasticity of Demand
- •Income Elasticity of Demand
- •23. Elasticity of Supply
- •20. The Factors that Influence the Elasticity of Demand
- •24.The factors that influence the elasticity of supply
- •25. Resource allocation methods
- •28.Is the Competitive Market Efficient?
- •29.Obstacles to Efficiency
- •30.Is the Competitive Market Fair?
- •It’s Not Fair If the Rules Aren’t Fair
- •31. The Firm and Its Economic Problem
- •32. A Firm’s Opportunity Cost of Production
- •33. Technological and Economic Efficiency
- •34. Information and Organization
- •36 Market and competitive environment
- •37 Markets and firms
- •41 Long run
- •39.Product Schedules, Product Curves
- •40.Short-Run Cost
- •41.Long-Run Cost
- •42.Economics and diseconomics of scale
- •43.Perfect competition
- •I. What is Perfect Competition?
- •44.The firm’s output decision
- •46.Output, Price, and Profit in the Long Run
- •47.Competition and Efficiency
- •49.Monopoly and How It Arises
- •50.A Single-Price Monopoly’s Output and Price Decisions
- •51) Single-Price Monopoly and Competition Compared
- •52) Price Discrimination
- •53) Monopoly Regulation
- •54.Monopolistic competition
- •I. What Is Monopolistic Competition?
- •55) Price and Output in Monopolistic Competition
- •56. Product Development and Marketing
- •57.What is Oligopoly?
- •58.Two Traditional Oligopoly Models
- •59.Origins and issues of macroeconomics
- •66. Economic Growth Trends
- •69. Economic Growth Theories
- •70. Employment and Unemployment, Three Labor Market Indicators
- •91. Monetary Policy Objectives and Framework
- •92. Monetary Policy Transmission
- •93. The Conduct of Monetary Policy
- •94. Extraordinary Monetary Stimulus
- •95. The Business Cycle
- •98.The monetary theory of business cycle
- •99.International trade and globalization
- •100.Social policy. Lorenz curve
40.Short-Run Cost
Total Cost
Total cost (TC) is the cost of all the factors of production a firm uses. Total fixed cost (TFC) is the cost of the firm’s fixed factors. Total variable cost (TVC) is the cost of the firm’s variable factors. Total cost is the sum of total fixed cost plus total variable cost so TC = TFC + TVC.
Marginal Cost and Average Costs
Marginal cost (MC) is the increase in total cost that results from a one-unit increase in output. The MC curve is U-shaped.
Average fixed cost (AFC) is total fixed cost per unit of output. The value of AFC falls as output increases.
Average variable cost (AVC) is total variable costs per unit of output. At low levels of output, AVC falls as output increases but at higher levels of output, AVC rises as output increases.
Average total cost (ATC) is the total cost per unit of output. ATC = AFC + AVC. At low levels of output, ATC falls as output increases but at higher levels of output, ATC rises as output increases.
41.Long-Run Cost
In the long run, a firm can vary the level of all resources so both labor and capital are variable factors. As a result, in the long run all costs are variable costs.
Production Function
The production function determines the behavior of long run costs.
A firm’s production function typically exhibits diminishing returns to capital as well as diminishing returns to labor. The marginal product of capital is the change in total product divided by the change in capital when the quantity of labor is held constant. Holding constant the quantity of employment, after some level of output the firm will have diminishing returns to capital—the marginal product of capital decreases as more capital is used.
The Long-Run Average Cost Curve
The long-run average cost curve, LRAC, is the relationship between the lowest attainable average total cost and output when both the plant size and labor are varied. This curve is derived from the short-run average total cost curves. It shows the lowest average total cost to produce a given level of output. In the figure, the LRAC curve is the darkened parts of the three short-run ATC curves.
42.Economics and diseconomics of scale
Economies of scale are features of a firm’s technology that lead to falling long-run average cost as output increases. With given factor prices, economies of scale occur if the percentage increase in output exceeds the percentage increase in all factors of production. The long-run average cost curve slopes downward in this range of output. The main source of economies of scale is greater specialization of both labor and capital.
Constant returns to scale are features of a firm’s technology that lead to constant long-run average cost as output increases. With given factor prices, economies of scale occur if the percentage increase in output equals the percentage increase in all factors of production. The long run average cost curve is horizontal in this range of output.
Diseconomies of scale are features of a firm’s technology that lead to rising long-run average cost as output increases. With given factor prices, economies of scale occur if the percentage increase in output is less than the percentage increase in all factors of production. The long run average cost curve slopes upward in this range of output.
The minimum efficient scale is the smallest quantity of output at which the long-run average cost curve reaches its lowest level.