ECON 240 1st Edition Lecture 11 Outline of Last Lecture I. Factors of Production II. The Short RunIII. The Long Run IV. Short Run Production a. Total Product (TP or Q))b. Average Product (AP)c. Marginal ProductV. Increasing Marginal ReturnsVI. Decreasing Marginal Returns Outline of Current Lecture II. Short – run cost a. Total Cost b. Total variable costc. Total fixed cost III. Average cost a. Average fixed cost b. Average variable cost c. Average total cost IV. Marginal cost Current LectureShort – Run CostThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.- To produce more output in the short run, a firm employs more labor, which means an increase cost 1. Total Cost 2. Marginal Cost 3. Average Cost  Total Cost - Firms total cost (TC) is the cost of all the factors of production the firms uses - Total cost has 2 parts:- Total fixed cost (TFC) and total variable cost (TVC)TC = TFC + TVC Total variable cost (TVC) is the cost of variable inputs used by the firm  Total fixed cost (TFC) the cost of firm's fixed inputs used by a firm – the cost of land, capital, and entrepreneurship- In short run, to change outputs, firm must change quantity of variable inputs, so total variable cost changes when output changes Average Cost- there are three average cost concepts  Average fixed cost (AFC) is total fixed cost per unit of output ▪ AFC = TFC/Q Average variable cost (AVC) is total variable cost per unit of output ▪ AVC = TVC/Q Average total cost (ATC) is total cost per unit of output▪ ATC = TC/ Q▪ ATC = AFC + AVCMarginal cost 2- The change in total cost that results from a one – unit increase in total product ◦ Marginal Cost = Change in total cost/ Change in total production - Marginal cost tells us how total cost changes as total product changes - AFC decreases as output increases- AVC is U - shaped - ATC is also U –