Econ 3 AQA A2 Economics Costs of Production

1. Costs of Production
Econ 3

2. Costs of Production
•
product costs(MC)changed by one unit totala
eachwhen cost (AC) istotal change producing
cost unit outputis the the cost of in the
Total cost (TC) is is the
Average
Marginal

3. The relationship between marginal
and average cost
•Changes in marginal will lower average sost
costs vice versa costcosts influence average
A fall in marginal
and

4. Short and long run costs
•
aShortfactors factor the is possible
all at isrun costs aretime costs experieced over
Long run time are the costs incurred when
thereleast oneof when it production to change
ofperiodnotcosts production change the quantity
the of enough of to

5. Fixed and variable costs
•
variable benot (FC) arebeoutputthezero run
have todo costs even as divided changes and
Short run paid can if outputisinto fixed and
They costs
Fixed costs change fixed in short

6. Fixed and variable costs
•
materials,costs. (VC) include the contracts and
the pay of costs arein short-term cost costs
produced workers also called direct of raw
Variable
because fuel amd power, overtime payments,
transport they are directly related to the amount

7. Short run marginal and average
costs
•
outputresulting slowly efficiencyof outputfalls at first as to as
increasingafter amarginal thecombinations. can be
andthe marginal costs the - sometimes known as resources
diminishing because rise cost is resources
In rise more riseproductive usually variable
The short run,
may so rises more certain variable sometimes refferred
combined inreturnsin thanlevel volume of is reached, output
However, returns

8. Short run marginal and average
costs
•
as output expands costs also fall and then rise
short run average

9. •
optimum point oncurve cuts the average costup average cost
The marginal as
the above it cost higher marginal curve is curve at the lowest point before
risinglowest point thethe average costcost pullssometimes referred to as the