hnd微观经济学报告1.docx

a) Total cost is the sum of Fixed cost and Variable cost. In the short run period, outputs will increase due to the increase of production. Fixed Cost does not vary with outputs, it is always a constant quantity.Variable Cost rises as outputs increase.Therefore, Total Cost curve is an upward sloping curve. b) Average cost is obtained by dividing Total cost by the number of units produced, i.e. Average Cost=Total Cost/Number of Unit. Average cost will vary with output because as production increases fixed cost will assume a smaller proportion of the cost of producing each unit. When output is small average cost will be high because fixed cost will be spread over a small number of unit. As output increases average cost will fall beacuse fixed cost will now be a smaller element of each unit.In addition, as firms grow they may be able to puchase materials at lower cost because they can order larger quantities. The cost reduction process stops when the level of output reaches the Technically Efficient point which is the lowest point of the Average Cost curve. When the output exceeds this point, the average cost will increase with the level of output because the Law of Diminishing Return sets in, i.e. increased output accompanied with more and more workers hired will result in a lower efficiency due to limited fixed resources,Cost Average Cost(Short Run) Technically EfficientOutputOutputc) Marginal cost is the addition to Total cost resulting from increasing total output by one more unit, which can be calculated as: Marginal cost = △Total cost／△Output.As output increases from zero, at first, inputs of variable factors are relatively less than inputs of fixed factors. Therefore, increasing the inputs of variable factors will raise the efficiency of production. MC falls as outputs increase. After certain output, as continuously increasing the inputs of variable factors, the production is inefficient. Therefore after that output, MC rises as output increases.The MC