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MICROECONOMICS

PARTS 1 & 2

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Microeconomics

What kind of costs should organizations consider?

When can profit be maximized?

Is there a point at which it is not cost effective to hire one additional person?

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Operating Cost

The cost of operating a facility such as a store or facility


Fixed Costs

A cost that does not change, no matter how much of a good is produced


Variable Costs

Costs that rise or fall depending on the quantity produced

Total Costs

Fixed costs and variable costs added together


TC = FC + VC

Marginal Product of Labor

The change in output from hiring one more worker


Diminishing Marginal Returns

A level of production in which product of labor decreases as the number of workers increases


Increasing Marginal Returns

A level of production in which the marginal product of labor increases as the number of workers increases

Marginal Costs

The additional cost of producing one more unit


Marginal Revenue

The additional income from selling one more unit of a good


Review Provide examples of fixed costs.

Provide examples of variable costs.

When is a producer’s profit maximized?

What causes diminishing marginal returns?

Why are some employees considered variable costs while others are considered fixed costs?

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