ECON 202 1st Edition Lecture 14 Outline of Last Lecture II Firms and Production Outline of Current Lecture III The Production Function Current Lecture A production function is the relationship between the quantity of inputs a firm uses and the quantity of output it produces Fixed Input an input whose quantity is fixed for a period of time and cannot be varied Variable Input an input whose quantity the firm can vary at any time Long Run is the time period in which all inputs can be varied Short Run the time period in which at least one input is fixed Total Product Curve shows how the quantity of output depends on the quantity of the variable input for a given quantity of the fixed input Marginal Product an input is the additional quantity of output produced by using one more unit of that input Firm Costs Fixed Costs a cost that does not depend on the quantity of output produced It is the cost of the fixed input Variable Cost a cost that depends on the quantity of output produced It is the cost of the variable input Total Cost the sum of the fixed cost and the variable cost of producing that quantity of output Total Cost Curve total cost depends on the quantity of output 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 Average Total Cost total cost divided by the quantity of output produced U Shaped Average Total Cost falls at low levels of output and then rises at higher levels Average Fixed Costs fixed cost per unit of output Average Variable Cost variable cost per unit of output Minimum cost Output the quantity of output at which average total cost is lowest it corresponds to the bottom the U shaped average total cost curve