Production, Cost, and the Perfect Competition Model

Average fixed cost

Total variable cost

Average total cost

Marginal cost

Average total costs decline as inputs are added because fixed costs are spread over more units.

Average fixed costs remain unchanged as more workers are hired leading to consistent production levels per worker employed.

Average total costs rise due to increased use of technology over labor inputs leading to higher capital costs per unit produced.

Marginal product declines as each additional unit requires more input than the previous one lowering overall efficiency and raising costs per unit produced.

Immediate reduction pollution reaches sustainable levels quickly without significant economic disruption major industries.

Complete shift industry standards towards green technologies occurs seamlessly rapidly benefiting environment economy equally.

All polluting industries become unprofitable shut down thereby solving environmental issues without any need further governmental action subsidies innovations.

Higher production costs leading companies pass these expenses onto consumers resulting possibly decreased overall consumption certain goods.

By selecting the project with the highest initial investment requirement disregarding profitability.

By comparing foregone profits from not pursuing each alternative project separately.

Evaluating which project will result in a shorter payback period without considering other factors.

Choosing the project aligned with the company's long-term goals irrespective of financial implications.

Marginal Cost

Variable Cost

Fixed Cost

Opportunity Cost

Depends on individual firm circumstances like cost structure, current technology level, and elasticity of products they produce.

Firms reallocate resources towards cleaner technologies or processes that incur fewer taxes, thus altering their initial input combinations and possibly increasing overall efficiency.

Their reaction is solely determined by the absolute size of the tax, regardless of the impact on marginal cost, profitability, or other factors.

Fewer investments into research & development since additional funds are required to pay the tax, leading to a decline in long-term innovation growth.

The government provides subsidies to all firms in the industry.

New firms enter the market, increasing competition and driving down prices.

Fixed costs for all firms in the market decrease proportionally.

Consumer preferences change favorably towards this firm’s product style or brand.

The revenue earned from selling additional units of good X.

The forgone production and profit from good Y.

The total cost associated with the production of goods X and Y.

The marginal cost of utilizing the resource for production.

It increases at an increasing rate.

It increases at a decreasing rate.

It remains constant.

It decreases.

Marginal utility

Elasticity

Opportunity cost

Scarcity