7.5 Types of cost, revenue and profit, short-run and long-run productionSyllabus9708–2026–2027Topic7.5Level—
What you’ll learn10 learning objectivesChoose one objective for a focused lesson, or study the complete topic.7.5.1Short-run production function• Short-run production function:- fixed and variable factors of production- definition and calculation of total product, average product and marginal product- law of diminishing returns (law of variable proportions)Syllabus objective7.5.2Short-run cost function• Short-run cost function:- definition and calculation of fixed costs (FC) and variable costs (VC)- definition and calculation of total, average and marginal costs (TC, AC, MC), including average (TVC, AVC)- explanation of shape of short-run average cost and marginal cost curvesSyllabus objective7.5.3Long-run production function• Long-run production function:- no fixed factors of production- returns to scaleSyllabus objective7.5.4Long-run cost function• Long-run cost function:- explanation of shape of long-run average cost curve- concept of minimum efficient scaleSyllabus objective7.5.5Economies of scale and average cost• Relationship between economies of scale and decreasing average costsSyllabus objective7.5.6Economies of scale• Internal and external economies of scaleSyllabus objective7.5.7Diseconomies of scale• Internal and external diseconomies of scaleSyllabus objective7.5.8Revenue• Definition and calculation of revenue: total, average and marginal revenue (TR, AR, MR)Syllabus objective7.5.9Types of profit• Definition of normal, subnormal and supernormal profitSyllabus objective7.5.10Profit calculations• Calculation of supernormal and subnormal profitSyllabus objective