deals with the relationship between the factors of

production and the output of goods and services.

Increasing returns

Diminishing returns

Negative returns

Marginal Product: The extra output or change in total product caused by the addition of one more unit of variable input.

Fixed Cost: The cost that the business has even if they are not producing anything.It stays constant (in the short run)

Variable Cost: The cost that the change when the rate of production of a business. Associated by labor & raw materialMarginal Cost: The extra cost incurred when a business produces one additional unit of a product.

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MC = TVC / MP

Total Cost = TFC + TVC

Total Revenue: The number of unit sold multiplied by the average price by unit.

Marginal Revenue: The extra revenue associated with the production and sale of one additional unit of output.

PROFIT = Total Revenue – Total Costs

Break even point is the total output or total product the business needs to sell in order to cover its total costs.

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Profit-maximizing quantity of output is reached when marginal cost and marginal revenue are equal.

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