ABSTRACT
This chapter begins by exploring the different kinds of production costs, including the difference between fixed and variable costs, as well as accounting, economic, and external costs. A numerical and graphical example is presented concerning how production levels, and production costs, change as the use of a variable input is adjusted. In general, production eventually exhibits diminishing marginal returns-each additional unit of a variable input increases production levels by a smaller amount. You will learn about total product curves, total cost curves, marginal cost curves, and the long-run average cost curve. Finally, the difference between economies of scale and diseconomies of scale is discussed.
