Econ 101 1st Edition Lecture 11Outline of Last Lecture I. New SectionOutline of Current Lecture I. How Economists Measure costs and profitsII. 8.1 Economic Cost and Economic ProfitIII. 8.2 A Firm with a Fixed Production Facility: Short-Run Costs IV. 8.3 Production and Cost In the Long RunCurrent LectureV. How Economists Measure costs and profitsa. Profits are the difference between revenue and total costsb. Economic Cost: the opportunity cost of the inputs used in the production process; equal to explicit (monetary) cost plus implicit (non-monetary) costi. Economic profit = total revenue – economic costVI. 8.1 Economic Cost and Economic Profita. Explicit Cost: a monetary paymentb. Implicit cost: an opportunity cost that does not involve a monetary paymentVII. 8.2 A Firm with a Fixed Production Facility: Short-Run Costs a. As the quantity produced increases, fixed costs are spread over more and more units, pushing down the average total cost (and vice versa)b. The gap between ATC and AVC is the average fixed cost (AFC)These 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.c.d. Short-Run Marginal Cost (MC): the change in short-run total cost resulting from a one-unit increase in output i.MC=ΔTCΔQ=Change∈TCChange∈outputVIII. 8.3 Production and Cost In the Long Runa. Expansion and Replication: Moving along the Long Run Average Cost Curveb. Types of Long-Run Average Costi. Constant Returns to Scale: a situation in which the long-run total cost increases proportionately with output, so average cost is constantii. Indivisible Input: an input that cannot be scaled down to produce a smaller quantity of output. Its cost is averaged over all productioniii. Diseconomies of scale: a situation in which the long-run average cost of production decreases as output increasesiv. Economies of scale: a situation in which the long-run average cost of production decreases as output increasesv. Minimum efficient scale: the output at which scale economies are
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