Short-run Production Costs

INTRODUCTION

Today we start to study the theory of the firm - specifically, costs of production in the short-run. You may read the text chapter identified below in the homework section and watch the related videos for help in understanding this material. This page contains all the information you need for today's class. Use the table of contents on the right to help you navigate.

HOMEWORK

Read Mankiw (Chapter 13) and watch the following videos. After reading the chapter and watching the videos you should be able to respond to each of the following prompts.

1. Explain the difference between fixed costs and variable costs.

2. Explain the difference between accounting profit and economic profit.

3. Define the short run in microeconomics.

4. Explain the difference between average values and marginal values.

5. Explain why the marginal product curve (MP) is downward sloping.

6. Explain why the MP intersects the average product curve (AP) at its maximum.

7. Explain why the marginal cost curve (MC) is upward sloping.

8. Explain why MC intersects the average total cost curve (ATC) at its minimum.

9. Explain why ATC is U-shaped.

Khan Academy videos

• Fixed, variable, and marginal costs

• Visualizing average costs and marginal costs as slopes

• Marginal cost and average total cost

• Marginal revenue and marginal cost

• Marginal revenue below average total cost

ASSESSMENTS AND ACTIVITIES

1. Problem of the Day: Not today!

2. Lecture: Short-run Production Costs

ENRICHMENT

Related Readings

• Corporations

• Corporate Financial Structure

• Corporate Governance

• Corporate Income Tax