Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Focus: Production & Costs — Short Run vs. Long Run; Fixed, Variable & Total Cost; AFC, AVC, ATC & MC · Objective 5 · SLO A & B

📋 Module Overview Page — "Start Here" (Canvas: Page, published)

Week 9 — Production & Costs

Welcome back from the midterm. Starting this week, we move from markets and policy to the firm — the engine inside every market. This week's question: how does a firm's cost of production change as it makes more? The answer is a set of cost curves whose shapes are the keys to everything in Weeks 10–12.

The big question: Why do average costs first fall and then rise — and what does that imply about how firms should operate?

By the end of this week, you can:

• distinguish fixed costs (don't change with output) from variable costs (do), and compute total cost (TC = FC + VC);
• compute and interpret AFC, AVC, ATC, and MC from a cost schedule;
• explain why AFC always falls, why AVC and ATC are U-shaped, and why MC cuts both AVC and ATC at their minima;
• tell the difference between accounting profit (subtracts explicit costs) and economic profit (subtracts explicit and implicit/opportunity costs);
• apply the sunk-cost principle: past spending that cannot be recovered should not affect current decisions (only marginal costs and benefits matter going forward).

Do this, in order:

1. Read & watch — the Week 9 resources (≈40 min). → Readings & Resources page
2. Lecture Tutorial — work through cost curves with your AI tutor (≈45 min). Due Sun, Nov 1. → submit the chat share link + summary
3. Practice Exercises — 6 quick reps, ungraded (≈15 min).
4. Quiz 9 — 10 questions, closed to AI (≈20 min). Due Sun, Nov 1.
5. Discussion 9 — "The sunk-cost fallacy." Initial post Fri, Oct 30, replies Sun, Nov 1.
6. Assignment 9 — the Production & Costs problem set (100 pts). Due Sun, Nov 1.
7. Workshop 9 — Graph & Model Workshop — compute cost curves from a schedule in a spreadsheet and catch the AI's mistakes (50 pts). Due Sun, Nov 1.

A note before you start: the cost curves we build this week are the skeleton of the next three weeks (perfect competition, monopoly, monopolistic competition). Every hour you spend making the U-shapes and MC relationships stick will pay off on the final.

📣 Welcome Announcement (Canvas: Announcement; available_from_date = 2026-10-26)

Subject: We're Back — and Now We Go Inside the Firm 🏭

Hi everyone,

Great work on the midterm. Now we turn a corner: instead of watching markets from the outside, we go inside the firm. This week is all about costs — not in the accounting sense, but in the economic sense that will explain why firms produce what they produce and charge what they charge.

This week's two big ideas:

• A firm's costs split cleanly into fixed (rent, equipment — same no matter what) and variable (labor, materials — rise with output). Together they give you total cost, and from there: AFC, AVC, ATC, and MC.
• Marginal cost is the engine. It starts low (thanks to specialization), then rises (thanks to diminishing returns). And here's the key relationship: MC always cuts AVC and ATC at their lowest points. That's not a coincidence — it's pure arithmetic. Once you see why, you'll never forget it.

Start with the Module Overview ("Start Here"), then the readings, then your AI Lecture Tutorial. The cost schedule in this week's workshop has every number pre-verified — lean on it.

See you in class,
Prof. Kessler