A firm can hire as much labor as it wishes at a fixed wage W. The change in variable cost is the per-unit cost of the extra labor w times the amount of extra labor needed to produce the extra output△L. Since△VC=w△L,it follows that MC=△VC/△Q=w△L/△Q Copyright by Caidonghong
Copyright by Caidonghong ❑ A firm can hire as much labor as it wishes at a fixed wage W. The change in variable cost is the per-unit cost of the extra labor w times the amount of extra labor needed to produce the extra output △L. Since △VC= w△L, it follows that MC = △VC/△Q = w△L/△Q
The marginal product of labor MPL is the change in output resulting from a 1-unit change in labor input,or AQ/AL. As a result, MC=△VC/△Q=w△L/△Q=wMPL Copyright by Caidonghong
Copyright by Caidonghong The marginal product of labor MPL is the change in output resulting from a 1-unit change in labor input, or △Q/△L. As a result, MC = △VC/△Q = w△L/△Q = w/MPL
Cost (dollars per year) 175 FC MC ATC 25 AVC .AFC Output(units per year) Cost curves for a firm donghong
Copyright by Caidonghong 7 25 AFC AVC ATC MC VC TC 175 Output(units per year) Cost (dollars per year) Cost curves for a firm FC A
In (a)total cost TC is the vertical sum of fixed cost FC and variable cost VC. In (b)average total cost ATC is the sum of average variable cost AVC and average fixed cost AFC. Marginal cost MC crosses the average variable cost and average total cost curves at their minimum points. Note:Recall that AC=TC/Q.It follows that, △AC/△Q=IQ(△TC/△Q)-TC]/Q2=(MC-AC)/Q Clearly,when AC is increasing and MC >AC,AAC/AQ is positive. Correspondingly,when AC is decreasing and MC<AC,AAC/AQ is negative. Copyright by Caidonghong
Copyright by Caidonghong In (a) total cost TC is the vertical sum of fixed cost FC and variable cost VC. In (b) average total cost ATC is the sum of average variable cost AVC and average fixed cost AFC. Marginal cost MC crosses the average variab1e cost and average total cost curves at their minimum points. Note: Recall that AC = TC/Q. It follows that, △AC/△Q = [Q(△TC/△Q) – TC]/Q2 = (MC-AC)/Q Clearly, when AC is increasing and MC >AC, △AC/△Q is positive. Correspondingly, when AC is decreasing and MC<AC, △AC/△Q is negative
7.3 Cost in the Long Run >User cost(使用成本)of capital-Sum of the annual cost of owning and using a capital asset,equal to economic depreciation plus forgone interest. >Rental rate-Cost per year of rent ing one unit of capital. Isocost line -Graph showing all possible combinations of labor and capital that can be purchased for a given total cost. Copyright by Caidonghong
Copyright by Caidonghong 7.3 Cost in the Long Run ➢ User cost(使用成本)of capital-Sum of the annual cost of owning and using a capital asset, equal to economic depreciation plus forgone interest. ➢ Rental rate - Cost per year of rent ing one unit of capital. ➢ Isocost line - Graph showing all possible combinations of labor and capital that can be purchased for a given total cost