Variable Cost

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

Wage

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

Inefficient points

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

True

At the maximum output point on a VC graph it is interpreted that..?

Adding more labor will decrease efficiency and output

Marginal cost

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?

Productivity changes

T or F: As productivity increases marginal cost decreases

True

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

True

T or F: Marginal cost and marginal product are directly related

False. Marginal cost and marginal product are inversely related

Total product

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