theory of production and costs
TRANSCRIPT
deals with the relationship between the factors of
production and the output of goods and services.
Increasing returns
Diminishing returns
Negative returns
Marginal Product: The extra output or change in total product caused by the addition of one more unit of variable input.
Fixed Cost: The cost that the business has even if they are not producing anything.It stays constant (in the short run)
Variable Cost: The cost that the change when the rate of production of a business. Associated by labor & raw materialMarginal Cost: The extra cost incurred when a business produces one additional unit of a product.
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MC = TVC / MP
Total Cost = TFC + TVC
Total Revenue: The number of unit sold multiplied by the average price by unit.
Marginal Revenue: The extra revenue associated with the production and sale of one additional unit of output.
PROFIT = Total Revenue – Total Costs
Break even point is the total output or total product the business needs to sell in order to cover its total costs.
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Profit-maximizing quantity of output is reached when marginal cost and marginal revenue are equal.
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