Lesson Plan

Short-Run Production and Costs



I. Production in the short-run

- the production function: Q = f(L,K,N,E)
- the short-run vs. the long-run for the production function
- the short-run production function graphically
- the total physical product of labor (TPPL)
- the marginal physical product of labor (MPPL)
- the "law" of diminishing marginal productivity (MPPL)
- the average physical product of labor (APPL)
- The relationship between TPPL, MPPL, and APPL
- numerical example

II. Production Costs in the short-run

- production costs defined
- implicit and explicit costs
- total costs (TC)
- total variable costs (TVC)
- total fixed costs (TFC)
- what do the cost curves look like graphically?
- going from production curves to cost curves graphically
- more definitions
- Average costs
- average total cost (ATC or AC)
- average fixed cost (AFC)
- average variable cost (AVC)
- marginal cost (MC)
- what do the average and marginal cost curves look like graphically?
- what does their u-shape (except AFC) reflect?
- relationship between the curves
- relating costs to production
- what is the relationship between AVC and APPL?
- what is the relationship between MC and MPPL?
- graphically