14.3 Short-Run Cost
MyEconLab Concept Video
To produce more output (total product) in the short run, a firm must employ more labor, which means that it must increase its costs. We describe the relationship between output and cost using three cost concepts:
Total cost
Marginal cost
Average cost
Total Cost
A firm’s total cost (TC) is the cost of all the factors of production used by the firm. Total cost divides into two parts: total fixed cost and total variable cost. Total fixed cost (TFC) is the cost of a firm’s fixed factors of production: land, capital, and entrepreneurship. In the short run, the quantities of these inputs don’t change as output changes, so total fixed cost doesn’t change as output changes. Total variable cost (TVC
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