The Firm: Cost and Output Determination – Study Notes

Which of the following best describes the difference between the short run and the long run in production decisions?

Suppose a wireless earbud manufacturer increases the number of workers while keeping the size of its factory and equipment constant. Initially, output rises rapidly, but after a certain point, each additional worker adds less to total output than the previous one. Which economic principle does this illustrate?

A firm’s total cost ($TC$) is given by $TC = TFC + TVC$. If total fixed costs ($TFC$) are $\$500$ and total variable costs ($TVC$) are $\$1,200$ at a certain output level, what is the average total cost ($ATC$) if 100 units are produced?