Chapter Six: Businesses and Their Costs
6.4 Short Run Vs. Long Run (03:00)
This clip distinguishes short run and long run in microeconomics, depending on whether firms can alter their production capacity and enter or exit the industry.
6.5 Short-run Production Relationship & the Law of Diminishing Returns (04:27)
This clip introduces the short-run input-output relationships, including the concepts of fixed and variable inputs, total, average and marginal products, and issues related to the law of diminishing returns that are present in short-run production relationships.
6.6 The Law of Diminishing Returns (10:54)
This clip introduces the phenomenon of law of diminishing returns in the short-run production process in which fixed inputs are present. It also examines further the concept by comparing, numerically and graphically, the relationship among total product, marginal product and average product.
6.6a The Law of Diminishing Returns: Introduction (03:36)
This clip expands on clip 6.6 and introduces the phenomenon of law of diminishing returns in the short-run production process in which fixed inputs are present.
6.6b The Law of Diminishing Returns: Further Analysis (08:08)
This clip expands on clip 6.6 and examines further the concept of law of diminishing returns by comparing, numerically and graphically, the relationship among total product, marginal product and average product of a short-run production process.
6.7 Short-run Production Costs (06:24)
This clip introduces various cost concepts in short-run production, including total fixed costs, total variable costs, total costs, average fixed costs, average variable costs, average total costs, and marginal costs. The connection between diminishing returns and marginal costs is also examined.
6.7a Total Fixed Costs, Total Variable Costs & Total Costs (01:45)
This clip expands on clip 6.7 and focuses on the concepts of total fixed costs, total variable costs, and total costs.
6.7d Average Total Costs (01:40)
This clip expands on clip 6.7 and focuses on the concept and the graph of average total costs, which is the sum of average fixed costs and average variable costs.
6.7e Marginal Costs (02:06)
This clip expands on clip 6.7 and focuses on the concept and the graph of marginal costs, which are the change in total costs (or in variable costs) due to one more unit of output. The connection between diminishing returns and marginal costs is also examined.
6.8 Cost Curve Relationships - MC, ATC, AVC, AFC (04:06)
This clip shows how to represent marginal costs, average total costs and average variable costs in one single graph. In particular, it is pointed that the marginal cost curve must cut through the minimum point of both the average variable cost curve and average total cost curve – critical if using the graph for analysis.
6.10 Deriving Long-run Cost Curves (05:11)
This clip shows how to conceptually derive a long-run average cost curve from the short-run average cost curves of successively larger plant sizes, highlighting the difference between the long-run and short-run curves.
6.11 Returns to Scale: Long Run (07:35)
This clip introduces the concepts of increasing, constant and decreasing returns to scale and provides possible reasons underlying the phenomena. The connection between returns to scale and the shape of long-run average cost curve is explored. The difference between the short-run concept of diminishing returns and the long-run concept of returns to scale is highlighted through an illustration.
6.12 Minimum Efficient Scale & Industry Structure (03:53)
The clip introduces the concept of minimum efficient scale (MES) - the lowest level of output required for a firm to minimize its long-run average total costs. It is shown that where MES occurs on an industry’s long-run average total cost curve will determine the structure of the industry – i.e., whether there will be few or many producers and whether there will be large, small or different sizes.