Cost of hiring the variable input needed to produce a given amount of output
What two things are needed to find variable cost?
The amount of labor needed and how much does the labor cost
Is a payment to an employee for labor services
What are at least 3 types of cost?
Variable cost, Fixed cost, Average cost, Marginal cost, Total cost
How is the total amount of money spent on labor for any given output calculated?
The total number of workers needed for a given output multiplied by their wage
How can variable cost be graphed?
By plotting variable cost and different outputs on a two dimensional graph
Points in which additional workers cause total product to fall
T or F: Inefficient points are included on graphs?
False: Inefficient points are excluded from the graph
Variable cost curve
The graphed version of variabl cost that shows the cost per amount of output
What is on the axis's of a variable cost curve?
Output is on the horizontal axis and Variable cost is on the vertical axis
What happens when the points begin to go backwards on a VC curve?
No more points are graphed because that is the point in which more labor reduces output
T or F: A variable curve graph is a straight line
False: A variable curve graph is a curve
When the points on a VC graph begin to go backwards does the output become more or less efficient?
The output becomes less efficient because more labor is producing less product
T or F: A VC graph does have a maximum output point
At the maximum output point on a VC graph it is interpreted that..?
Adding more labor will decrease efficiency and output
Amount it costs to produce one additional unit of output
Mathmatical definition of marginal cost
Change in variable cost divided by the change in total product
Why does the marginal cost change?
T or F: As productivity increases marginal cost decreases
When graphing marginal cost what are the axis's labled?
The vertical axis is marginal cost while the horizontal axis is the total product
T or F: Productivity and cost are inversely related
T or F: Marginal cost and marginal product are directly related
False. Marginal cost and marginal product are inversely related
Identifies what outputs are possible for given amounts of input
What does a total product graph look like?
What does a variable cost curve look like?
What does a marginal product graph look like?
What does the marginal cost graph look like?
Point of inflection
Point at which the VC curve is flat
Variable cost curve
Shows how much money must be spent of labor to produce a given level of output
Why does marginal cost decrease?
Due to specilization and teamwork