Costs of Production Flashcards
What is an isocost line?
A line where all points on the line have an equal total cost regardless of the combination of L and K
What is an expansion path?
A line representing the least expensive way of producting each output of costs.
Connectings all points of tangency of the isocost lines.
How to SRAC curves influence the shape of a LRAC curve?
Their minimum points create tangency points on the LRAC curve
dAC = ?
What determines the inflection point in LRTC?
The intersection of LRMC and LRAC
What is the line between C and D represent?
TFC
What is a First Order Condition (F.O.C.)?
The derivative set equal to 0
What is the derivative = to?
Change in
When is the TP Curve concave down?
When MP(L) is decreasing = Law of Diminishing Returns
What is a Second Order Condition (S.O.C.)?
The derivative of the F.O.C.
When is the TP Curve concave up?
When MP(L) is increasing
AVC = ?
TVC / q
= wL (Unit Cost of Labor) / q
= w/AP(L)
