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ECON 2020 Exam 3 Lecture 6

by: Brianna Notetaker

ECON 2020 Exam 3 Lecture 6 ECON 2020 - 4

Marketplace > Auburn University > Economcs > ECON 2020 - 4 > ECON 2020 Exam 3 Lecture 6
Brianna Notetaker

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About this Document

This is the final set of materials discussed for Exam 3. They cover the Law of Diminishing Marginal Returns.
Principles of Microeconomics
William Macy Finck
Class Notes
Econ, Economics, economic, micro, Microecon, Microeconomic, Microeconomics
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This 3 page Class Notes was uploaded by Brianna Notetaker on Monday October 10, 2016. The Class Notes belongs to ECON 2020 - 4 at Auburn University taught by William Macy Finck in Fall 2015. Since its upload, it has received 4 views. For similar materials see Principles of Microeconomics in Economcs at Auburn University.


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Date Created: 10/10/16
ECON 2020Exam 3 Lecture 6 Review Q TFC TVC TC MC AFC AVC ATC 0 120 0 120 ----- ------ ------ ------ 1 120 60 180 60 120 60 180 2 120 90 210 30 60 45 105 3 120 150 270 60 40 50 90 4 120 240 360 90 30 60 90 5 120 380 500 140 24 76 100  Green highlighted is what was filled in. Law ofDiminishingMarginal Returns [Bulleted List]  ASsuccessiveunitsofa variableresourceare addedto a fixed resource, themarginalproductofthe variableresourceeventually decreases.  LDMR explainswhythe shortrun cost curves eventuallyincreaseas outputincreases.  Onlyappliesinshortrun(no fixedresources inlongrun) Law ofDiminishingMarginalReturns FORMULAS:  MarginalProductLabor – theadditionaloutputproducedbyone more unitoflabor;MP L ∆Q / ∆L  TOTALPRODUCT = Q = ∑MP L  MC = Wage / MP L [Short-run example] K L W Q MP MC = W/MP L L 1 0 $5 0 ------ ------ 1 1 $5 10 10 $.50 1 2 $5 30 20 $.25 1 3 $5 40 10 $.50 1 4 $5 44 4 $1.25 1 5 $5 46 2 $2.50  As returns(MP ) diminish,marginalcostincreases. L LongRun Costs  EconomiesofScale/IncreasingReturnstoScale – as q rises,LRATC falls 2  DiseconomiesofScale/DecreasingReturnsto Scale – as q rises,LRATC rises  Know explanationfor theshapeof thecurves. Changein LR Costs Factors ThatShift LongRunCost Curves 1. InputPrices – inputpricesandcost curves movetogether 2. Regulation/Taxes–taxesandcosts movetogether 3. Technology– as technologyimproves,costs fall 3


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