Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 5 Firm Behavior and the Organization of Industry
Chapter 13 of 36 The Costs of Production
Section 12 of 21
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He knows how his costs vary as he changes the level of production by finding the answer to the following two questions
How much does it cost to make the typical cup of coffee?
How much does it cost to increase production of coffee by 1 cup?
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How much does it cost to make the typical cup of coffee?
We divide the firm's total costs by the quantity of output it produces.
If his coffee shop produces 2 cups of coffee per hour
· column 2, total cost is $3.80
· column 7, average total cost per cup: $3.80 / 2 = $1.90
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How much does it cost to increase production of coffee by 1 cup?
In column 8 we see the marginal cost of making one more cup of coffee does not change at a constant rate.
For example, looking at columns 2 and 8
· moving from making 2 cups to 3 total cost increases $0.50
· moving from making 5 cups to 6 cups total cost increases $1.30
This is because column 6 average variable cost change increases as production increases, due to diminishing marginal product.
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constant rate of change
ittei henka ritsu
一定変化率
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