by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Production Technologies? In planning for the long run, the firm will compare alternative production technologies (or processes). In this context, technology refers to all alternative methods of combining inputs to produce outputs. It does not refer to a...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Average Variable Cost?The cost of producing a firm’s output depends on how much labor and physical capital the firm uses. A list of the costs involved in producing cars will look very different from the costs involved in producing computer software or haircuts...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Cost Function? A cost function is a mathematical expression or equation that shows the cost of producing different levels of output. What we observe is that the cost increases as the firm produces higher quantities of output. This is pretty intuitive,...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is a Factor Payment? For every factor of production (or input), there is an associated factor payment. Factor payments are what the firm pays for the use of the factors of production. From the firm’s perspective, factor payments are costs. From the owner of each...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Marginal Product? We should also introduce a critical concept: marginal product. Marginal product is the additional output of one more worker. Mathematically, Marginal Product is the change in total product divided by the change in labor: MP = ΔTP /...
