Cost function

` Cost Analysis and Estimation

What Makes Cost Analysis Difficult? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Opportunity Cost ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Incremental and Sunk Costs in Decision Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Short-run and Long-run Costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Short-run Cost Curves ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Short Run Cost Graphs AFC Q Q 1. 2. AVC 3. Q AFC AVC ATC MC MC intersects lowest point of AVC and lowest point of ATC. When MC < AVC, AVC declines When MC > AVC, AVC rises

Relationships Among Cost & Production Functions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],prod. functions cost functions MP L L MC AP AVC Q Q cost

Long-run Cost Curves ,[object Object],[object Object]

Long Run Cost Functions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Q LAC LMC SAC 2 SMC 2 Q 2 Q 3

Long Run Cost Function (LAC) Envelope of SAC curves

Cost Elasticity and Economies of Scale ,[object Object],[object Object],[object Object],[object Object]

Economists think that the LAC is U-shaped ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],CRS region MES Max ES DRS LAC

Economies of Scope ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Cost-volume-profit Analysis ,[object Object],[object Object],[object Object]

Cost function

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Cost function

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