question
Why does the TC curve upwards?
answer
Variable costs increase with quantity thus TC increases with quantity as well
question
How do you calculate MC given TC and quantity?
answer
MC = ΔTC/ΔQ
question
What are diminishing returns to an input?
answer
An increase in quantity of an input leads to a decline in the marginal product of that input (all other inputs fixed)
question
How do diminishing returns impact the TC curve?
answer
TC curve becomes steeper as quantity produced increases
question
Which cost(s) are sunk in the long-run?
answer
Nothing 🙂
question
Which cost(s) are sunk in the short-run?
answer
Fixed costs
question
What is the difference between ATC and MC?
answer
ATC is the average cost to produce a unit of output, while MC is the cost to produce on more unit
question
What are the 2 effects increasing output has on total cost?
answer
Spreading effect (lower ATC) and diminishing returns effect (higher ATC)
question
How can we find the minimum-cost output?
answer
Where MC = ATC, or the lowest point on the ATC curve
question
What are increasing returns to scale?
answer
Long-run ATC declines as output increases
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