cost-

Short run and long run	Short run- period of time in which at least 1 factor is fixed all production takes place in the short runt Long run- the long run is the period of time in which all factors are changed but the state of production is fixed
Total average and marginal product	Total product is the total output that a firm produces . Average product is the output that is produced on average by each unit of the variablle factor Ap= tp/v Marginal proudct is the extra outpuut that is produced by using an extra unit of the variable factor
The law of diminishing returns	The hypothesis of eventually diminishing marginal returns- As extra units of a variable factor are added to a given quantity of a fixed unit of the variable factor will eventually diminish The hypothesis of eventually diminshing average returns- as extra units of a variable factors are added to a given quantity of a fixed factor, the output per unit of the variable facto will eventually diminish.
Economic cost	Econoimic cost is the oppurtunity cost of the firms production 1. factors that are purchased from others and not already owned by the firm- getting a worker and paying 1000$ cost is the 1000$ and everything that 1000$ could be used on 2. factors that are already owned by the firm- implicit costs- the earnings that a firm could have had if it had emplyed its factors in another use or if it had hired out- An owner of a firm could make 100 $ working somewhere else as a tax collecter, has to reach that and + or selse he will take that job instead and the shop will close.
Short run costs-	Firms have certain costs 1. Total costs-total costs is the complete cost pf producing output Total fixed costs- the costs of the fixed assets Total variable costs- total costs of the variable assets Total costs-tfc plus tvc 2. average fixed costs- the fixed costs per unit of output average variable costs- the variable costs per unit of output average total cost- the total cost per unit of output 3. marginal cost- mc is the increase in total cost of producing an extra unit of output
The long run	• We have already said that the long run is the planning stage and the entrepreneur is free to adjust the quantity of all factors of production and is only restrained by the level of technology. • The long-run average cost curve [LRAC] in theory is an “envelope curve,” it envelopes an infinite number of short-run average cost [SRAC] curves.
Economies of Scale	• Explains the down sloping part of the long-run ATC curve. • Scale increases, will for a time lead to lower average cost of production. As economies get bigger they will benifit through specification- workers will specify thus work better Division of later-repititive and effecient Bulk bying- discounts given Transport economies- with bul transporting prices go down Large machines- they can buy their own machines Promotional- advertizing
Diseconomies	When a firm becomes to large problems may arise 1. Control and communication problems- the larger a firm is the harder it is for management to coordinate production and communicate effectively. Both lead to inefficiency (and increased costs per unit output). 2. Alienation and loss of identity- As firms grow both workers and managers may begin to feel they are only a very small part of a very large organization; they start to think what they do doesn’t matter and they lose a sese of belonging and loyalty . As this happens they become less productive forcing up the per unit cost
External economies and diseconomies of scale	• +Example- A firm grows large so colleges in the area start teaching the skills necessary to perform in the industry; lowering LRAC costs to the firm with a better educated workforce. - Competition among individual firms cause the cost of labor, capital and raw materials to go up.
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