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UIUC - ECON 102 - Class Notes - Week 10

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UIUC - ECON 102 - Class Notes - Week 10

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Introduction The price of a good is the amount of money the buyer has to spend it from the seller a. The cost of a good is the amount of money the seller has to spend to produce it b. EX: What is the cost of a table? c. Add all ingredients -- factory, workers, tools, wood But how many tables are you making? 1. Fixed Cost and Variable Cost Total Cost: cost of producing a certain quantity of units of a good a. Fixed Costs: costs that do not vary with the quantity of units produced EX: renting a factory or a year i. b. Variable Costs: costs that vary with the quantity of units produced EX: labor, amount of wood, amount of tools i. c. C=FC+VC d. 2. Marginal Cost Marginal Cost: cost of producing one more unit of a good How much extra is it to produce one more good? i. a. 3. Law of Diminishing Marginal Returns: with a fixed input, and an increasing variable input, at some point the marginal product of the variable input must decline b. Marginal Product: additional output produced when one more unit of variable input is added c. (10/24, 10/26, 10/31, 11/2) Competition Monday, October 24, 2016 11:17 AM
Fixed input is \$1000 and workers' wages are \$100/worker i. Marginal cost= change in cost/change in quantity ii. Increasing Marginal Returns: range of input usage over which marginal product increases a. Diminishing Marginal Returns: range of input usage over which marginal product decreases b. Average Cost Average Fixed Costs: Total Fixed Cost divided by the quantity of units produced a. b. Average Total Costs (Average Cost): total cost divided by the quantity of units produced ATC=TC/q i. c. Average Variable Costs: Total Variable Cost divided by the quantity of units produced AVC=TVC/q i. d. 4.

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Description: Last part of Trade lecture notes and the first part of Competition lecture notes
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