Short-Run Costs 7.3-3- Marie Smith Flashcards Preview

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Flashcards in Short-Run Costs 7.3-3- Marie Smith Deck (12)
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1
Q

What is the marginal cost of production?

A

It is the additional cost incurred when a firm produces an extra unit of output.

2
Q

Define marginal cost mathematically.

A

It is the change in variable cost divided by the change in production (output)

3
Q

How do you find the change in total product?

A

Find two point on the total product schedule and find the difference in output.

4
Q

How do you find the change in variable cost?

A

Find the difference in variable costs when increasing production from one amount to another.

5
Q

When you find the MC for each increase in production you get an entire range of marginal costs. In the lower ranges are costs increasing or decreasing?

A

Marginal costs are decreasing in the lower ranges.

6
Q

Why does MC decrease in the lower ranges?

A

As you add workers, teamwork and specialization reduce the cost for producing another unit.

7
Q

Why does MC increase?

A

MC increases because of congestion and decreasing productivity.

8
Q

Changes in MC are always the result of what?

A

Changes in MC are always the result of changes in productivity.

9
Q

How are productivity and cost related?

A

They are inversely related.

10
Q

When productivity goes up what happens to cost?

A

Cost goes down.

11
Q

When Labor productivity is decreasing what happens to marginal cost?

A

Marginal cost goes up.

12
Q

What does Marginal cost tell you?

A

Marginal cost tells you how much you are paying to get an additional unit.