Short-Run Production Costs
Paul Scott
7 min read
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Study Guide Overview
This study guide covers short-run and long-run costs, focusing on the differences between fixed and variable inputs. It explains cost calculations, including fixed costs (FC), variable costs (VC), total costs (TC), and average/marginal costs (AFC, AVC, ATC, MC). The guide also differentiates between accounting and economic costs/profits, emphasizing the importance of implicit costs. Finally, it provides graphs and tables to illustrate cost curve relationships and how shifts in costs impact these curves.
#1. Microeconomics Study Guide: Short-Run Costs and Cost Curves
This unit is absolutely crucial for your AP Micro exam. Make sure you understand these concepts inside and out!
#The Short Run vs. The Long Run
- Short-Run: At least one input is fixed (e.g., factory size). Think of it as a period where you can't easily change everything.
Capital is usually considered fixed in the short run.
The key difference is the flexibility of inputs. Short-run has at least one fixed input, while long-run has all variable inputs.
#2. Costs: Fixed, Variable, and Total
- Fixed Costs (FC): Costs that do not change with output (e.g., rent).
These are constant regardless of production level.
These increase as production increases.
Remember this equation: TC = FC + VC. It's fundamental!
#Accounting vs. Economic Costs
- Accounting Costs: Explicit, out-of-pocket payments.
- Economic Costs: Sum of explicit costs and implicit costs (opportunity costs).
Always consider opportunity costs in economic analysis.
Forgetting to include implicit costs when calculating economic costs is a common error. Always think about ...
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