4.1   Production Functions:  Short Run and Long Run
Unit 4:  Production and Costs
Steven M. Reff
Economics Lecturer
University of Arizona
(2007 - 2016)
The 2015 University of Arizona
Five-Star Faculty Award
6 hours - 9 hours max.
10 - 15% of exam
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Unit 4:  Production Costs, Revenue, and Profit (10%–15%)

• Topic 4.1   Production Functions: Short and Long Run
• Topic 4.2   Marginal Product and Diminishing Returns
• Topic 4.3   Short-Run Costs
                      • fixed cost, variable cost, average cost, marginal cost, and
                         total cost
                      • the relationship between productivity and marginal cost
• Topic 4.4   Long-Run Costs and Economies of Scale
• Topic 4.5   Revenue vs. Profit
                      • Accounting versus economic profits
                      • Normal profit
                      • Profit maximization: MR = MC rule
Costs and Revenue of Doing Business
Short-Run Production Function
Diminishing Product and Diminishing Marginal Returns
Costs -- Fixed, Variable, and Total Costs
eVideos -- Short Videos:
eWorkbook Activities Interactive:
eTextbook Reading:
eWorkbook Activities Interactive:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.2  Marginal Product and Diminishing (Marginal) Returns
eWorkbook Activities Interactive:
Lump Sum Tax on a Business
Lump Sum Subsidy for a Business
Cost of Doing Business, Part II
Per-Unit Tax on a Business
eVideos -- Short Videos:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.3  Short Run Costs
eWorkbook Activities Interactive:
Long-Run Costs and Economies of Scale Activity
Long-Run vs. Short-Run ATC
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.4  Long-Run Costs and Economies of Scale
eWorkbook Activities Interactive:
Directions for link below:  Press the yellow button that relates
to the questions' opportunity cost and the cyan button that
relates to an explicit or an implicit cost.
Opportunity Cost and Explicit and Implicit Costs
Review Resources for Production Costs
TEST YOURSELF 4.1 - 4.5:
eWorkbook Activities Interactive:
Per-Unit Subsidy for a Business
Cost of Doing Business (Fixed Cost and Variable Costs Draggable Examples)
Cost of Doing Business (Calculating Variable Costs and Marginal Cost Table)
Cost of Doing Business (Calculate FC, VC, TC, MC Table)
Cost of Doing Business (Calculate Revenue, Cost, and Profit-Maximization)
Drawing Cost Curves, Part I
Reffonomics Baseball (Unit 4:  Costs)
30 Multiple Choice Questions on Costs
18 Multiple Choice Questions on Costs
12 Multiple Choice Questions on Costs
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.5  Long-Run Cost Minimizing Input Combination
AFC, AVC, and ATC Explained
AFC, AVC, and ATC showing FC, VC, and TC
FC, VC, and TC Graph, Part II
AFC, AVC, and ATC Graph
FC, VC, and TC Graph, Part I
MC added to AFC, AVC, ATC Graph
Topic 4.5 is covered in Unit 7:  Factors Market
Types of Profit and Profit-Maximizing Rule
TicTok Revenue and Loss
Wall Street Journal:
4.5  Revenue vs. Profit
eWorkbook Activities Interactive:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  
Revenue, Costs, and Profit (4 Activities)
Costs -- FC, VC, TC and Figuring AFC, AVC, and ATC
Costs -- Fixed Costs, Variable Costs, and Total Costs
Costs -- Long-Run Average Total Cost Curve
Costs -- AFC, AVC, ATC, and MC
Review Videos:
Costs -- Long-Run Average Total Cost Curve
Talking Heads Videos:
21 Multiple Choice Questions on Costs
CLEP® Principles of Microeconomics Course Preparation
NOTE:  This website is not a College Board® sponsored website.  Everything on this
website can be used by teachers or students to get a better understanding of their
college-level Principles of Microeconomics course.
View Teachers' and
Students' Testimonials
(3 min. or less, along with 3 multiple choice questions)
(3 min. or less, along with 3 multiple choice questions)
eVideos -- Short Videos:
(3 min. or less, along with 3 multiple choice questions)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -