by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Technology Shifts affect the Long-Run Average Cost Curve? New developments in production technology can shift the long-run average cost curve in ways that can alter the size distribution of firms in an industry. New production technologies do not inevitably...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Factors of Production? Economists divide factors of production into several categories: Natural Resources (Land and Raw Materials) – The ingredients for the pizza are raw materials. These...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Fixed Inputs? We can describe inputs as either fixed or variable. Fixed inputs are those that can’t easily be increased or decreased in a short period of time. In the pizza example, the building is a fixed input. Once the entrepreneur signs the lease, he or...
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 /...
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 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,...
