SHORT-RUN COST EXAMPLE
PRODUCTION
TOTAL COST
AVERAGE COST
MARGINAL
PRODUCTIVITY
FUNCTION
MEASURES
MEASURES
COST
MEASURES
K
L
Q
TFC
TVC
1C
5
0
1
0
15
2
38
3
63
84
100
$200
$200
$200
$200
$200
$200
$200
$200
$200
$0
$20
$40
$60
$80
$100
$120
$140
$160
$200
$220
$240
$260
$280
$300
$320
$340
$360
5
5
5
5
5
5
4
5
5
6
7
5
8
114
122
128
AFC
AVC
ATC
MC
AP,
MP,
$13.33
$1.33
$14.66
$1.33
$5.26
$1.05
$6.31
$0.87
$3.17
$0.95
$4.12
$0.80
$2.38
$0.95
$3.33
$0.95
15
19
21
21
20
19
17.4
16
15
23
25
21
16
14
$2.00
$1.00
$3.00
$1.25
$1.75
$1.05
$2.80
$1.43
$1.64
$1.14
$2.78
$2.50
$1.56
$1.25
$2.81
$3.33
INPUT PRICES
COST FORMULAS
K = capital
PRICE OF CAPITAL (PK) = $40/UNIT
UNIT
TFC = PK'K
L = labor
PRICE OF LABOR (PL)
TVC = PL-L
= $20/UNIT
UNIT
Q = output
TC = TFC + TVC
TFC = total fixed cost
AFC = TFC/Q
TVC = total variable cost
AVC = TVC/Q
TC = total cost
ATC = AFC+AVC = TC/Q
MC = ATC/AQ = ATVC/AQ
AFC = average fixed cost
AVC = average variable cost
ATC = average total cost
MC = marginal cost
APL = average product of labor
MPL = marginal product of labor