Question

Explain the relationship between a firm's short-run production function and its short-run cost function. Focus on the marginal product of an input and the marginal cost of production.

Your response should be at least 75 words in length.

Answer 1

The short-run cost function is the manufacturing and pricing's key financial analysis. Marginal cost values are put between output intervals, which is an indication that this cost measure shows complete cost changes as a consequence of a unit change in amount. Because the change in amount is always the same, we can calculate the marginal cost as output rises. Then the Marginal Cost if the second output unit is the Total Cost change or the Total Variable Cost change between one unit and two production units. Total Cost remains constant over the output range, but Total Variable Cost increases at a falling rate. But, when the fourth unit is produced, Total Variable Cost starts to increase at an increasing rate. Then, Total Fixed Cost decreases as more units are produced (per unit cost).