Question

How does a fixed input differ from a variable input?What does a cost function show?What is marginal cost?Is the marginal cost likely to be constant regardless of the level of output produced?What is the relationship between a firm’s marginal cost curve and its output supply curve?

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Answer 1

How does a fixed input differ from a variable input?

The difference lies in the time period. In short run there are both fixed and variable inputs, fixed inputs that cannot be increased or decreased according to the requirement, and variable inputs that can be changed in quantity. In long run all inputs become variable because it gives firm enough time to change the scale of production.

What does a cost function show?

It shows how much cost is incurred on hiring fixed inputs and variable inputs in producing a given number of units

What is marginal cost?

It is the additional cost that is incurred when one more unit is produced by the firm

Is the marginal cost likely to be constant regardless of the level of output produced?

No. It depends on each additional unit produced so if there is no production, it is zero. Also, it can increase, decrease or remain same depending upon the requirements of variable inputs.

What is the relationship between a firm’s marginal cost curve and its output supply curve?

For competitive firms, rising portion of firm's marginal cost curve that begins from the minimum of average variable cost, exhibits the output supply curve