◆ ARTICLES
The Library
418 articles on personal finance, investing, and the economy — filter by topic, sort, or search for the one you came for.
27 articles · page 1 of 2
◆ Spotlight
◆ THE FIRM & PRODUCTION
Average Cost vs. Marginal Cost: The Two Numbers That Drive Every Output Decision
Average cost tells you what each unit cost on average; marginal cost tells you what the next one will cost.
- Average cost is total cost divided by units made; marginal cost is the added cost of producing exactly one more unit
- Marginal cost — not average cost — is the number that should drive whether you make the next unit, take the next order, or run the extra shift
- There is an iron rule between them: whenever marginal cost is below average cost it pulls the average down, and when it is above the average it pulls it up
◆ THE FIRM & PRODUCTION
Marginal Cost: The Only Cost That Matters for the Next Decision
Marginal cost is the additional cost of producing one more unit of output. It is the cost variable that drives every output, pricing, and hiring decision at…
◆ LABOR ECONOMICS
Marginal Revenue Product: What One More Worker Is Actually Worth
The marginal revenue product of labor is the additional revenue generated by hiring one more worker.
◆ COMPETITION & MONOPOLY
Marginal Revenue: The Revenue From One More Sale
Marginal revenue is the additional revenue earned from selling one more unit of output. Its relationship with price determines the firm's market power and its…
◆ THE FIRM & PRODUCTION
Factors of Production: The Four Inputs Behind Everything Made
Factors of production are the inputs used to create goods and services: land, labor, capital, and entrepreneurship.
◆ THE FIRM & PRODUCTION
What Happens When a Company Doubles in Size? Economies and Diseconomies of Scale
Growing bigger can make every unit cheaper — until it doesn't. Economies of scale pull costs down as a firm expands; diseconomies push them back up.
◆ THE FIRM & PRODUCTION
Economies of Scale: Why Getting Bigger Sometimes Means Getting Cheaper
Economies of scale occur when long-run average cost falls as output increases. They are the economic engine of industrial concentration — and when they're…
◆ THE FIRM & PRODUCTION
What Happens When a Factory Gets More Workers? The Production Function, Explained
A production function maps inputs to maximum output. It explains why the tenth worker adds less than the first, why factories hit walls, and how productivity…
◆ THE FIRM & PRODUCTION
The Production Function: What Comes Out When You Put Inputs In
A production function describes the relationship between the quantities of inputs a firm uses and the maximum output it can produce.
◆ THE FIRM & PRODUCTION
The Short Run vs. Long Run: The Most Important Time Distinction in Economics
The short run is the period when at least one input is fixed. The long run is when all inputs are variable.
◆ THE FIRM & PRODUCTION
Why Cost Curves Are U-Shaped — and What That Shape Tells Every Business
The average cost curve dips, bottoms out, then rises — a U. The shape isn't a textbook quirk; it's the result of two real forces pulling in opposite…
◆ THE FIRM & PRODUCTION
Returns to Scale: What Happens When You Double Everything in a Production Process
Double every input — does output double, more than double, or less? Returns to scale answers that, and it explains why some industries have giants and others…
◆ THE FIRM & PRODUCTION
Marginal Product of Labor: The Numbers Behind Every Hiring Decision
Marginal product of labor is the extra output from one more worker. Here is the math that tells a firm exactly when to hire, when to stop, and what a worker…
◆ THE FIRM & PRODUCTION
Marginal and Average Product: How Much Does One More Worker Add?
Marginal product is the additional output from one more unit of an input. Average product is output per unit of input.
◆ THE FIRM & PRODUCTION
Inside a Firm's Costs: Fixed, Variable, and Total — and Why the Difference Matters
Fixed costs don't move with output; variable costs do. Splitting a firm's total cost into those two pieces is the first thing that explains why prices,…
◆ COMPETITION & MONOPOLY
The Profit-Maximization Rule: Why Every Firm Targets MR = MC
The profit-maximization rule states that firms maximize profit by producing where marginal revenue equals marginal cost.
◆ COMPETITION & MONOPOLY
Long-Run Equilibrium: Where Competition Eventually Takes Every Market
Long-run equilibrium is the state a competitive market reaches after all entry and exit adjustments are complete.