Ch07
•Download as PPT, PDF•
0 likes•704 views
- In the short run, firms have fixed costs that do not depend on output level. They also have variable costs that vary with output. Total costs are the sum of fixed and variable costs. - Marginal cost is the change in total cost from producing one additional unit. It reflects changes in variable costs. Marginal cost typically rises as output increases in the short run due to diminishing returns. - A profit-maximizing firm will produce the quantity where marginal revenue equals marginal cost. In perfect competition, this occurs where price equals marginal cost.
Report
Share
Report
Share
Recommended
Short-Run Costs and Output Decisions
- In the short run, firms have fixed costs that do not depend on output level. They also have variable costs that vary with output. Total costs are the sum of fixed and variable costs.
- Marginal cost is the change in total cost from producing one additional unit. It reflects changes in variable costs. Marginal cost typically rises as output increases in the short run due to diminishing returns.
- A profit-maximizing firm will produce the quantity where marginal revenue equals marginal cost. In perfect competition, this occurs where price equals marginal cost.
Perfect Competition: Marginal revenue-and-marginal-cost-approach
This document discusses marginal revenue and marginal cost. It defines marginal revenue as the additional revenue generated from increasing sales by one unit, and marginal cost as the change in opportunity cost from producing one more unit. A firm maximizes profit where marginal revenue equals marginal cost. Perfect competition results in allocative efficiency, with price equal to marginal cost. In long-run equilibrium under perfect competition, firms have no incentive to enter or exit the market as price equals average total cost, and no incentive to change capacity as marginal cost equals price.
Long run Managerial Economics
The document discusses cost functions and curves in the long run. It defines long run costs as those that can change as the firm varies all inputs over time. The long run average cost curve depicts the relationship between output and long run average cost of production as the firm takes advantage of economies of scale by increasing production. Economies of scale refer to decreasing long run average costs from increasing production, while diseconomies of scale refer to increasing costs from producing at too large a scale.
Chapter 8 perfect competitio-micro
Perfect competition is characterized by many small firms, homogeneous products, perfect information and free entry and exit. Under perfect competition in the short-run, firms are price takers and maximize profits by producing where marginal revenue equals marginal cost. In long-run equilibrium, firms earn zero economic profit as entry and exit cause supply to equal minimum average total cost. Perfect competition leads to productive and allocative efficiency.
Cost function Managerial Economics
The document defines short-run and long-run costs, and explains the relationships between total, fixed, and variable costs. It also defines average and marginal costs. Specifically, it states that in the short-run, output can be increased or decreased while fixed costs remain unchanged. Total cost equals fixed plus variable cost. Average and marginal cost curves are also discussed, with average cost initially declining and then increasing due to diminishing returns.
Econ606 chapter 09 2020
This document discusses the economic costs of production for businesses. It defines economic costs as the opportunity costs of resources used in production, including both explicit monetary costs and implicit costs. The document distinguishes between accounting profit, which only considers explicit costs, and economic profit, which considers total opportunity costs. It then covers the relationships between total, marginal, and average production in the short-run and how costs like total, average, and marginal costs are derived. Finally, it discusses long-run production costs and how economies of scale can result in lower average costs for businesses.
Long Run Average Cost Curve
The document discusses long-run average cost (LAC) curves. It explains that in the long-run, all factors of production are variable and the LAC curve guides entrepreneurs on optimal plant size and output levels. The LAC curve is derived from short-run cost curves and is U-shaped, representing minimum unit costs for different output levels. Economies of scale may exist as costs fall with increasing output up to a point, after which diseconomies of scale can set in as costs begin rising again. The break-even point is where total revenue equals total costs and no economic profit is made.
Cost curve
About COST & REVENU CONCEPTS , Short & Long term curves ( their explaination ) , different types cost in economics term.
Recommended
Short-Run Costs and Output Decisions
- In the short run, firms have fixed costs that do not depend on output level. They also have variable costs that vary with output. Total costs are the sum of fixed and variable costs.
- Marginal cost is the change in total cost from producing one additional unit. It reflects changes in variable costs. Marginal cost typically rises as output increases in the short run due to diminishing returns.
- A profit-maximizing firm will produce the quantity where marginal revenue equals marginal cost. In perfect competition, this occurs where price equals marginal cost.
Perfect Competition: Marginal revenue-and-marginal-cost-approach
This document discusses marginal revenue and marginal cost. It defines marginal revenue as the additional revenue generated from increasing sales by one unit, and marginal cost as the change in opportunity cost from producing one more unit. A firm maximizes profit where marginal revenue equals marginal cost. Perfect competition results in allocative efficiency, with price equal to marginal cost. In long-run equilibrium under perfect competition, firms have no incentive to enter or exit the market as price equals average total cost, and no incentive to change capacity as marginal cost equals price.
Long run Managerial Economics
The document discusses cost functions and curves in the long run. It defines long run costs as those that can change as the firm varies all inputs over time. The long run average cost curve depicts the relationship between output and long run average cost of production as the firm takes advantage of economies of scale by increasing production. Economies of scale refer to decreasing long run average costs from increasing production, while diseconomies of scale refer to increasing costs from producing at too large a scale.
Chapter 8 perfect competitio-micro
Perfect competition is characterized by many small firms, homogeneous products, perfect information and free entry and exit. Under perfect competition in the short-run, firms are price takers and maximize profits by producing where marginal revenue equals marginal cost. In long-run equilibrium, firms earn zero economic profit as entry and exit cause supply to equal minimum average total cost. Perfect competition leads to productive and allocative efficiency.
Cost function Managerial Economics
The document defines short-run and long-run costs, and explains the relationships between total, fixed, and variable costs. It also defines average and marginal costs. Specifically, it states that in the short-run, output can be increased or decreased while fixed costs remain unchanged. Total cost equals fixed plus variable cost. Average and marginal cost curves are also discussed, with average cost initially declining and then increasing due to diminishing returns.
Econ606 chapter 09 2020
This document discusses the economic costs of production for businesses. It defines economic costs as the opportunity costs of resources used in production, including both explicit monetary costs and implicit costs. The document distinguishes between accounting profit, which only considers explicit costs, and economic profit, which considers total opportunity costs. It then covers the relationships between total, marginal, and average production in the short-run and how costs like total, average, and marginal costs are derived. Finally, it discusses long-run production costs and how economies of scale can result in lower average costs for businesses.
Long Run Average Cost Curve
The document discusses long-run average cost (LAC) curves. It explains that in the long-run, all factors of production are variable and the LAC curve guides entrepreneurs on optimal plant size and output levels. The LAC curve is derived from short-run cost curves and is U-shaped, representing minimum unit costs for different output levels. Economies of scale may exist as costs fall with increasing output up to a point, after which diseconomies of scale can set in as costs begin rising again. The break-even point is where total revenue equals total costs and no economic profit is made.
Cost curve
About COST & REVENU CONCEPTS , Short & Long term curves ( their explaination ) , different types cost in economics term.
Costs in the short run
Fixed costs remain constant regardless of the level of output in the short run, such as lease payments and maintenance, while variable costs change with output, like fuel and labor. The law of diminishing returns states that as more of a variable input is added to a fixed input, the additional output eventually declines. Total costs increase, but average costs fall and then rise as marginal costs decline and then increase with output as diminishing returns sets in.
Profit maximization
This document discusses profit maximization for businesses. It defines profit as revenue minus costs. A business maximizes profit by producing at the quantity where marginal revenue equals marginal cost. This is achieved through analyzing total revenue and total cost curves as well as marginal revenue and marginal cost curves. The marginal revenue and marginal cost method is described as the process companies use to determine the optimal output and price levels to maximize their return.
Theory of cost final
The document discusses various cost concepts in economics including:
- Opportunity cost is the next best alternative use of a resource.
- Accounting costs include explicit payments, while economic costs also include implicit opportunity costs.
- Total, average, and marginal costs are defined for both the short-run and long-run. In the short-run some costs are fixed while in the long-run all costs are variable.
- Cost curves like AVC, ATC, and MC are U-shaped based on the law of diminishing returns in production. Minimum efficient scale is where long-run average costs are minimized.
CONCEPT OF COST
This document defines key concepts related to cost, including:
- Explicit costs refer to actual money spent on inputs, while implicit costs are the estimated value of inputs supplied by the firm itself.
- Cost functions study the relationship between costs of inputs and the level of output.
- In the short run, total cost (TC) equals total fixed cost (TFC) plus total variable cost (TVC). Average and marginal costs are also defined.
- Fixed costs do not change with output levels in the short run, while variable costs do change.
- A schedule of costs is presented showing output levels and the associated total, average, and marginal costs.
- The relationship between marginal
Production And Cost In The Short Run
The document discusses different types of costs firms face in both the short run and long run. It defines explicit costs as actual cash payments and implicit costs as opportunity costs. In the short run, some resources are fixed while others are variable. As more of the variable input is added, marginal product initially increases but eventually declines due to diminishing returns. In the long run, all inputs are variable and firms can choose different plant sizes, leading to economies or diseconomies of scale.
Business Economics - Unit-4 - Osmania University
This document provides an overview of cost concepts and classifications that are important for business economics. It discusses different types of costs such as direct costs, indirect costs, fixed costs, and variable costs. It also covers cost classifications based on nature, relation to cost centers, functions, behavior, management decision making, production process, and time. Key cost concepts explained include total costs, average costs, marginal costs, opportunity costs, and sunk costs. Cost classification is presented as a logical process to categorize costs according to their features to aid accounting and economic analysis.
Cost and its types
This document defines various types of costs including opportunity cost, actual cost, direct and indirect costs, fixed and variable costs, and average, marginal, and total costs. It provides examples and definitions for each type of cost. Key types discussed are direct vs indirect costs, fixed vs variable costs, and the calculations for total, average, and marginal costs. Managerial uses of cost analysis include determining the most profitable operation rate, setting product prices, and understanding cost concepts.
Industrial economics
This document provides an overview of key concepts in industrial economics including:
1. It discusses micro and macro economics, and defines industrial economics as dealing with economic problems of firms and industries.
2. Some key concepts covered include production functions, costs, revenues, and market structures like monopoly and price discrimination.
3. Laws of production like returns to scale and variable proportions are explained, as well as cost concepts like total, average, and marginal costs.
Gross National Product
The document discusses national income accounting and how it was developed in response to the Great Depression. It explains how GDP, GNP, and other measures are calculated and what they represent. Specifically, it outlines the three approaches to calculating GDP - output, income, and expenditure - and how GDP is used to measure a country's economic performance and standard of living. However, it also notes some limitations of GDP as an indicator.
Product And Cost
The document discusses various concepts related to production and costs, including:
1. Production involves converting inputs into outputs through organized activities to create value and utility. The main factors of production are land, labor, capital, and organization.
2. Production functions show the relationship between physical inputs and outputs. Total, marginal, and average product are discussed for functions with one variable input like labor.
3. Optimal use of variable inputs occurs when marginal revenue product equals marginal resource cost. Production with two inputs is discussed using isoquants and isocost lines.
Busines Economics - Unit-5 - IMBA - Osmania University
MARKET STRUCTURES AND PRICING
Concept of market structures
Perfect competition market and price determination
Monopoly and abnormal profits
Monopolistic Competition
Price Discrimination
Oligopoly-Features of oligopoly
Syndicating in oligopoly
Kinked demand curve
Price leadership and market positioning
Conditions for Company Equilibrium
To achieve Equilibrium, a Company must meet two conditions:
You need to make sure that the marginal revenue is equal to the marginal cost (MR = MC).
If MR> MC, the Company has an incentive to expand production and sell additional units.
If MR<MC, the Company needs to reduce production because additional units generate more costs than revenue.
Only when MR = MC does the Company achieve maximum profit.
Perfect Competition
Perfect Competition content slideshow. Designed for the Economics A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Perfect Competition
Equilibria of Perfect Competition
Market Shocks in Perfect Competition
Evaluating Perfect Competition
Shut down price
The document discusses shut down price and normal profit price for a firm operating in a perfectly competitive market. It shows these prices on a diagram with marginal cost, average cost and average variable cost curves. The shut down price is where price equals minimum average variable cost, as below this price the firm would face losses by continuing operations. The normal profit price is where price equals average cost, allowing the firm to cover total costs and earn normal profits in the short run. The shut down price is a short run concept that determines whether a firm should continue or cease production temporarily.
Theory of cost
This document discusses different types of costs related to production. It defines money cost, nominal cost, real cost, opportunity cost, implicit cost, explicit cost, accounting cost, social cost, and entrepreneur's cost. It also covers classification of costs, elements of costs, short-run costs including fixed, variable, total, average and marginal costs. Finally, it discusses long-run cost curves including long-run average cost and long-run marginal cost curves.
Chap4
1. The document discusses the production process of firms, including the concepts of production, costs, and profit maximization.
2. It explains that production involves transforming inputs into outputs using factors of production, with the goal of firms being to maximize profits.
3. The production process involves decisions about how much output to supply, which production technology to use, and how much of each input to demand.
Chapter 10 monopoly and monopsony
This document discusses monopoly and monopoly power. It begins by reviewing perfect competition and then defines monopoly as a market with one seller and many buyers of a unique product where there are barriers to entry. A monopolist maximizes profits by producing where marginal revenue equals marginal cost. The document provides examples of how a monopolist determines output and price. It also discusses how a monopolist may respond to shifts in demand and the effects of taxes. The document notes that multi-plant firms will equalize marginal costs across plants. While true monopoly is rare, oligopolistic markets can exhibit monopoly power if firms have downward sloping demand curves. The Lerner Index is introduced as a way to measure monopoly power.
Perfect Competition
Perfect Competition describes a market structure with many small firms producing identical products, with easy entry and exit from the market. Under Perfect Competition, firms aim to maximize profits by producing where their marginal cost equals marginal revenue. At this point of equilibrium, firms can earn normal profits but cannot earn abnormal profits in the long run due to competition. The key characteristics of Perfect Competition are that it is very efficient, always reaches equilibrium prices and quantities, and provides consumers with the best prices.
marginal opportunity cost or marginal rate of transformation (moc or mrt)
Marginal opportunity cost (MOC) refers to the quantity of one commodity that must be sacrificed to produce one additional unit of another commodity. It is calculated as the change in output of one commodity divided by the change in output of the other. MOC shows the tradeoffs between commodities that must be made due to limited resources. The production possibilities curve (PPC) graphically represents the different combinations of two commodities an economy can produce with full employment of its resources. The slope of the PPC is equal to the MOC and can take different shapes depending on whether the MOC is increasing, decreasing, or constant.
Cost and Cost Curve
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Sadia yeasmin
Mst. Humayara khatun
Maimuna Akther Sauda
Mst. Beauty khatun
Salma khatun
Theory of the Firm (Product, Cost, Revenue, Profit)
Following this presentation you will:
- Understand what the Theory of The Firm means
- Explain the firm behavior to minimise cost
- Understand the firm behavior to increase productivity and economics efficiency.
- Explain the firms behavior to maximise profit.
- Understand the concept of Economy of Scale.
Case Econ08 Ppt 08
This document discusses short-run costs and output decisions for firms. It defines various cost concepts like fixed costs, variable costs, total costs, average costs and marginal costs. It explains that in the short-run, firms face fixed costs that cannot be changed. It also discusses how firms determine the profit-maximizing level of output by producing at the point where marginal revenue equals marginal cost. The marginal cost curve represents a firm's short-run supply curve in perfect competition.
Cost CONCEPT
This document discusses different cost concepts including fixed costs, variable costs, total costs, average costs, and marginal costs. It defines each type of cost and provides examples. Fixed costs remain constant regardless of production levels, while variable costs change with output. Total costs are the sum of fixed and variable costs. Average costs are total costs divided by output. Marginal cost is the change in total cost from a one-unit change in output. The document also discusses typical total, average, and marginal cost curves and how they relate. It concludes by covering economies and diseconomies of scale.
More Related Content
What's hot
Costs in the short run
Fixed costs remain constant regardless of the level of output in the short run, such as lease payments and maintenance, while variable costs change with output, like fuel and labor. The law of diminishing returns states that as more of a variable input is added to a fixed input, the additional output eventually declines. Total costs increase, but average costs fall and then rise as marginal costs decline and then increase with output as diminishing returns sets in.
Profit maximization
This document discusses profit maximization for businesses. It defines profit as revenue minus costs. A business maximizes profit by producing at the quantity where marginal revenue equals marginal cost. This is achieved through analyzing total revenue and total cost curves as well as marginal revenue and marginal cost curves. The marginal revenue and marginal cost method is described as the process companies use to determine the optimal output and price levels to maximize their return.
Theory of cost final
The document discusses various cost concepts in economics including:
- Opportunity cost is the next best alternative use of a resource.
- Accounting costs include explicit payments, while economic costs also include implicit opportunity costs.
- Total, average, and marginal costs are defined for both the short-run and long-run. In the short-run some costs are fixed while in the long-run all costs are variable.
- Cost curves like AVC, ATC, and MC are U-shaped based on the law of diminishing returns in production. Minimum efficient scale is where long-run average costs are minimized.
CONCEPT OF COST
This document defines key concepts related to cost, including:
- Explicit costs refer to actual money spent on inputs, while implicit costs are the estimated value of inputs supplied by the firm itself.
- Cost functions study the relationship between costs of inputs and the level of output.
- In the short run, total cost (TC) equals total fixed cost (TFC) plus total variable cost (TVC). Average and marginal costs are also defined.
- Fixed costs do not change with output levels in the short run, while variable costs do change.
- A schedule of costs is presented showing output levels and the associated total, average, and marginal costs.
- The relationship between marginal
Production And Cost In The Short Run
The document discusses different types of costs firms face in both the short run and long run. It defines explicit costs as actual cash payments and implicit costs as opportunity costs. In the short run, some resources are fixed while others are variable. As more of the variable input is added, marginal product initially increases but eventually declines due to diminishing returns. In the long run, all inputs are variable and firms can choose different plant sizes, leading to economies or diseconomies of scale.
Business Economics - Unit-4 - Osmania University
This document provides an overview of cost concepts and classifications that are important for business economics. It discusses different types of costs such as direct costs, indirect costs, fixed costs, and variable costs. It also covers cost classifications based on nature, relation to cost centers, functions, behavior, management decision making, production process, and time. Key cost concepts explained include total costs, average costs, marginal costs, opportunity costs, and sunk costs. Cost classification is presented as a logical process to categorize costs according to their features to aid accounting and economic analysis.
Cost and its types
This document defines various types of costs including opportunity cost, actual cost, direct and indirect costs, fixed and variable costs, and average, marginal, and total costs. It provides examples and definitions for each type of cost. Key types discussed are direct vs indirect costs, fixed vs variable costs, and the calculations for total, average, and marginal costs. Managerial uses of cost analysis include determining the most profitable operation rate, setting product prices, and understanding cost concepts.
Industrial economics
This document provides an overview of key concepts in industrial economics including:
1. It discusses micro and macro economics, and defines industrial economics as dealing with economic problems of firms and industries.
2. Some key concepts covered include production functions, costs, revenues, and market structures like monopoly and price discrimination.
3. Laws of production like returns to scale and variable proportions are explained, as well as cost concepts like total, average, and marginal costs.
Gross National Product
The document discusses national income accounting and how it was developed in response to the Great Depression. It explains how GDP, GNP, and other measures are calculated and what they represent. Specifically, it outlines the three approaches to calculating GDP - output, income, and expenditure - and how GDP is used to measure a country's economic performance and standard of living. However, it also notes some limitations of GDP as an indicator.
Product And Cost
The document discusses various concepts related to production and costs, including:
1. Production involves converting inputs into outputs through organized activities to create value and utility. The main factors of production are land, labor, capital, and organization.
2. Production functions show the relationship between physical inputs and outputs. Total, marginal, and average product are discussed for functions with one variable input like labor.
3. Optimal use of variable inputs occurs when marginal revenue product equals marginal resource cost. Production with two inputs is discussed using isoquants and isocost lines.
Busines Economics - Unit-5 - IMBA - Osmania University
MARKET STRUCTURES AND PRICING
Concept of market structures
Perfect competition market and price determination
Monopoly and abnormal profits
Monopolistic Competition
Price Discrimination
Oligopoly-Features of oligopoly
Syndicating in oligopoly
Kinked demand curve
Price leadership and market positioning
Conditions for Company Equilibrium
To achieve Equilibrium, a Company must meet two conditions:
You need to make sure that the marginal revenue is equal to the marginal cost (MR = MC).
If MR> MC, the Company has an incentive to expand production and sell additional units.
If MR<MC, the Company needs to reduce production because additional units generate more costs than revenue.
Only when MR = MC does the Company achieve maximum profit.
Perfect Competition
Perfect Competition content slideshow. Designed for the Economics A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Perfect Competition
Equilibria of Perfect Competition
Market Shocks in Perfect Competition
Evaluating Perfect Competition
Shut down price
The document discusses shut down price and normal profit price for a firm operating in a perfectly competitive market. It shows these prices on a diagram with marginal cost, average cost and average variable cost curves. The shut down price is where price equals minimum average variable cost, as below this price the firm would face losses by continuing operations. The normal profit price is where price equals average cost, allowing the firm to cover total costs and earn normal profits in the short run. The shut down price is a short run concept that determines whether a firm should continue or cease production temporarily.
Theory of cost
This document discusses different types of costs related to production. It defines money cost, nominal cost, real cost, opportunity cost, implicit cost, explicit cost, accounting cost, social cost, and entrepreneur's cost. It also covers classification of costs, elements of costs, short-run costs including fixed, variable, total, average and marginal costs. Finally, it discusses long-run cost curves including long-run average cost and long-run marginal cost curves.
Chap4
1. The document discusses the production process of firms, including the concepts of production, costs, and profit maximization.
2. It explains that production involves transforming inputs into outputs using factors of production, with the goal of firms being to maximize profits.
3. The production process involves decisions about how much output to supply, which production technology to use, and how much of each input to demand.
Chapter 10 monopoly and monopsony
This document discusses monopoly and monopoly power. It begins by reviewing perfect competition and then defines monopoly as a market with one seller and many buyers of a unique product where there are barriers to entry. A monopolist maximizes profits by producing where marginal revenue equals marginal cost. The document provides examples of how a monopolist determines output and price. It also discusses how a monopolist may respond to shifts in demand and the effects of taxes. The document notes that multi-plant firms will equalize marginal costs across plants. While true monopoly is rare, oligopolistic markets can exhibit monopoly power if firms have downward sloping demand curves. The Lerner Index is introduced as a way to measure monopoly power.
Perfect Competition
Perfect Competition describes a market structure with many small firms producing identical products, with easy entry and exit from the market. Under Perfect Competition, firms aim to maximize profits by producing where their marginal cost equals marginal revenue. At this point of equilibrium, firms can earn normal profits but cannot earn abnormal profits in the long run due to competition. The key characteristics of Perfect Competition are that it is very efficient, always reaches equilibrium prices and quantities, and provides consumers with the best prices.
marginal opportunity cost or marginal rate of transformation (moc or mrt)
Marginal opportunity cost (MOC) refers to the quantity of one commodity that must be sacrificed to produce one additional unit of another commodity. It is calculated as the change in output of one commodity divided by the change in output of the other. MOC shows the tradeoffs between commodities that must be made due to limited resources. The production possibilities curve (PPC) graphically represents the different combinations of two commodities an economy can produce with full employment of its resources. The slope of the PPC is equal to the MOC and can take different shapes depending on whether the MOC is increasing, decreasing, or constant.
Cost and Cost Curve
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Sadia yeasmin
Mst. Humayara khatun
Maimuna Akther Sauda
Mst. Beauty khatun
Salma khatun
Theory of the Firm (Product, Cost, Revenue, Profit)
Following this presentation you will:
- Understand what the Theory of The Firm means
- Explain the firm behavior to minimise cost
- Understand the firm behavior to increase productivity and economics efficiency.
- Explain the firms behavior to maximise profit.
- Understand the concept of Economy of Scale.
What's hot (20)
Busines Economics - Unit-5 - IMBA - Osmania University
Busines Economics - Unit-5 - IMBA - Osmania University
marginal opportunity cost or marginal rate of transformation (moc or mrt)
marginal opportunity cost or marginal rate of transformation (moc or mrt)
Theory of the Firm (Product, Cost, Revenue, Profit)
Theory of the Firm (Product, Cost, Revenue, Profit)
Similar to Ch07
Case Econ08 Ppt 08
This document discusses short-run costs and output decisions for firms. It defines various cost concepts like fixed costs, variable costs, total costs, average costs and marginal costs. It explains that in the short-run, firms face fixed costs that cannot be changed. It also discusses how firms determine the profit-maximizing level of output by producing at the point where marginal revenue equals marginal cost. The marginal cost curve represents a firm's short-run supply curve in perfect competition.
Cost CONCEPT
This document discusses different cost concepts including fixed costs, variable costs, total costs, average costs, and marginal costs. It defines each type of cost and provides examples. Fixed costs remain constant regardless of production levels, while variable costs change with output. Total costs are the sum of fixed and variable costs. Average costs are total costs divided by output. Marginal cost is the change in total cost from a one-unit change in output. The document also discusses typical total, average, and marginal cost curves and how they relate. It concludes by covering economies and diseconomies of scale.
Cost theory
The document discusses cost theory concepts including opportunity costs, explicit and implicit costs, short-run and long-run costs, fixed and variable costs, total cost, average cost, and marginal cost. It explains how average, marginal, and total costs are related and how their curves are shaped. Specifically, it summarizes that marginal cost and short-run average cost curves slope upward due to diminishing returns, while the long-run average cost curve is U-shaped as economies of scale initially lower costs but diseconomies later raise them. The envelope relationship shows that short-run average costs are always above the minimum long-run average cost.
Cost 2
The document discusses cost theory and the different types of costs firms face. It explains that in the short-run, total cost is the sum of fixed and variable costs. Average costs like average fixed cost, average variable cost, and average total cost are defined. In the long-run, all costs are variable. Economies and diseconomies of scale impact the long-run average cost curve shape. The envelope relationship shows that short-run average costs are always above the long-run average cost curve.
COST
This document defines and explains various cost concepts including: total fixed costs, average fixed costs, total variable costs, average variable costs, total costs, average total costs, and marginal costs. It discusses the differences between fixed and variable costs. Typical total, average, and marginal cost curves are shown and explained. The document also covers economies and diseconomies of scale, and internal and external economies.
The Production And Cost C M A
The firm is an economic institution that transforms factors of production into consumer goods – it:
Organizes factors of production.
Produces goods and services.
Sells produced goods and services.
Chap4
1. The document discusses the production process of firms, including the concepts of production, costs, profits, and the production decision process.
2. It explains the differences between accounting costs, economic costs, explicit costs, and implicit costs. Accounting profits consider explicit costs only, while economic profits consider both explicit and implicit costs.
3. The production process involves using inputs like labor, capital, and raw materials through a production function to transform these inputs into outputs according to the technology used. The levels of inputs can be varied in the long run but not the short run.
Cost theory and analysis.pptx
Here are the steps to solve this example:
1. Estimate the total cost function:
TC = a + bQ + cQ^2
2. Take the first derivative of the total cost function to get the average cost function:
AC = b + 2cQ
3. Take the first derivative of the average cost function and set equal to 0 to minimize AC:
b + 2cQ = 0
Q = -b/2c
4. Plug back into the average cost function to get the minimum AC.
5. Compare minimum AC to market price to determine if production should continue.
In this example, the estimated total cost function is:
TC = 700
Cost
The document discusses the costs of production for firms. It defines different types of costs including fixed costs, variable costs, total costs, average costs, and marginal costs. Fixed costs remain constant regardless of the amount of output, while variable costs change with output. Total cost is the sum of fixed and variable costs. The document also discusses how cost curves like total cost, average cost, and marginal cost shift when costs or technology change.
9 costs class
This document discusses key concepts related to business costs including:
1. It defines economic costs, accounting costs, and sunk costs.
2. It explains the differences between short-run and long-run costs, and how total, average, and marginal costs are calculated in each time period.
3. It provides examples of cost schedules and diagrams cost curves, discussing their characteristics and relationships.
Cost Concepts
This document discusses various cost concepts used for analyzing costs of projects. It defines total fixed costs, average fixed costs, total variable costs, average variable costs, total costs and average total costs. It also defines marginal cost. It discusses production rules for firms in the short run and long run, including how firms should determine production levels to maximize profits or minimize losses. It also covers economies and diseconomies of scale.
Week 4 slides 1 [core]
This document discusses key concepts related to a firm's supply decision including production functions, costs, and profit maximization. It explains that in the short-run a firm has fixed inputs and variable inputs. As the firm increases the variable input, it initially experiences increasing returns to scale but eventually diminishing returns as shown by a downward sloping marginal product curve. The document also discusses short-run costs including fixed costs, variable costs, average costs and marginal costs and how their respective curves are shaped.
Me 6
The document discusses cost and revenue functions in the short run and long run. It defines key concepts like total, average, and marginal costs. Total costs are divided into total fixed and total variable costs. Average costs include average fixed cost, average variable cost, and average total cost. Marginal cost is the change in total cost from producing an additional unit. Similarly, the document defines total, average, and marginal revenue. It explains how costs and revenues behave in the short run versus the long run.
Economics 4
The document discusses different types of costs in production including:
1. Cost of production refers to the total expenses incurred to produce a commodity, including costs of inputs, labor, technology, and efficiency.
2. Money costs include expenses like materials, wages, machinery, depreciation, interest, and profit. Real costs refer to the efforts and sacrifices of producers.
3. Opportunity cost is the next best alternative forgone in producing a good. For a farmer, it is the output of potatoes not produced by using resources for wheat.
CONCEPTS OF COST
Cost refers to the total expenditure incurred by a producer to produce a given level of output. It includes explicit costs, which are cash payments to factors of production, and implicit costs, which are imputed costs of self-owned resources. Total cost is the sum of fixed costs, which do not vary with output, and variable costs, which do vary with output. Marginal cost is the change in total cost from producing one additional unit of output. It is U-shaped, initially decreasing and then increasing, reflecting the law of variable proportions. Average cost is total cost divided by output and is the sum of average fixed cost and average variable cost.
cost3-161126065821 (1).pptx
This document defines and explains different types of costs including fixed costs, variable costs, total costs, average costs, and marginal costs. It discusses total fixed costs, average fixed costs, total variable costs, average variable costs, total costs, average total costs, and marginal costs. Graphs are included showing typical total cost, average cost, and marginal cost curves. The concepts of economies of scale and diseconomies of scale are also summarized along with internal and external economies.
Theory of the firm
This document discusses key concepts related to the theory of the firm including costs, revenues, profits, and output decisions. It defines different types of costs like fixed, variable, average, and marginal costs. It also explains short-run and long-run periods and concepts like economies and diseconomies of scale. The document outlines how profits, revenues and costs determine a firm's optimal output level and whether it earns normal profits or abnormal profits.
Business economics cost analysis
The document discusses various cost concepts in business economics including cost functions, opportunity costs, types of costs, fixed and variable costs, total costs, average costs, marginal costs, break-even analysis, contribution margin, and profit-volume ratio. It provides definitions and formulas for these concepts and illustrates their calculation and application in decision making.
Costs Of Production Micro Economics ECO101
This document discusses the costs of production for a firm. It begins by defining a firm and its goal of profit maximization. It explains that a firm faces constraints from technology, information, and markets. It also discusses the five basic decisions a firm must make: what and how much to produce, how to produce, how to organize workers, how to market and price products, and what to produce internally vs externally.
The document then explains the differences between short-run and long-run time frames. In the short-run, capital is fixed while variable inputs can change, while in the long-run all inputs are variable. It introduces the concepts of total, average, and marginal costs. Finally, it discusses how
Chapter 7 cost of production
This chapter discusses the costs of production for a firm. It explains the differences between fixed and variable costs, as well as how average and marginal costs are determined. In the short run, costs are influenced by increasing or decreasing returns. In the long run, the user cost of capital must be considered. Cost curves, including total, average, and marginal costs are presented to show how costs change with different levels of output.
Similar to Ch07 (20)
More from Carmela Grace Gavino
Ch16
This document summarizes key concepts related to international trade, comparative advantage, and protectionism. It discusses how trade surpluses and deficits are measured, the economic basis for trade through comparative advantage as described by Ricardo, how absolute and comparative advantages differ, how mutual gains can be realized through specialization and trade, how exchange rates impact trade patterns, the sources of comparative advantage, and examples of different types of trade barriers and economic integration agreements.
Chapter15
The document discusses several topics related to income distribution and poverty, including:
- The utility possibilities frontier and concepts of efficiency.
- The main sources of household income including wages, property, and government.
- Measures of income inequality such as the Lorenz curve and Gini coefficient.
- Definitions and measurements of poverty.
- Arguments for and against redistribution of income and wealth.
- Major U.S. government redistribution programs and policies.
Monopolistic competition & oligopoly
Monopolistic competition and oligopoly are two market structures between perfect competition and monopoly. Monopolistic competition is characterized by many firms with differentiated products. Firms have some market power but no barriers to entry or exit. Oligopoly is characterized by a few dominant firms where the behavior of one firm depends on its competitors. Game theory is used to analyze strategic interactions among oligopolistic firms.
Monopoly
1. Monopolies have market power that allows them to raise prices without losing all demand. Barriers to entry like large capital requirements, patents, and government franchises prevent competition against monopolies.
2. A pure monopoly is a single firm with no close substitutes and significant barriers to entry. It faces the market demand curve and sets both price and quantity to maximize profits where marginal revenue equals marginal cost.
3. Monopolies restrict output and raise prices above marginal cost, leading to inefficient allocation of resources. Antitrust policy aims to remedy monopolies through legislation like the Sherman Act and agencies that enforce antitrust laws.
Input Demand: The Capital Market and the Investment Decision
The document discusses capital markets and the investment decision process. It defines different types of capital including physical, social, intangible, and human capital. It then discusses how the capital market links household savings to business investment. Firms evaluate potential investment projects based on their expected rates of return, costs, and the opportunity cost of funds in financial markets. A profit-maximizing firm will invest in projects until the expected return equals the market interest rate.
Ch09
- Firms demand inputs based on the demand for the outputs those inputs can produce. Inputs are complementary or substitutable, and subject to diminishing returns.
- A firm will demand an input as long as its marginal revenue product exceeds its cost. For a single variable input like labor, the firm's demand curve is the marginal revenue product curve.
- When a firm uses multiple variable inputs, a change in input price causes substitution and output effects that impact factor demand. The firm will substitute cheaper factors for more expensive ones.
Ch08
The document discusses costs and output decisions for firms in the long run and short run. It provides an example of a car wash earning positive profits in the short run by setting output where marginal revenue equals marginal cost. In the long run, firms will enter industries with positive profits and exit industries with losses until prices equal minimum long-run average costs and profits are driven to zero.
Indifference curves
Indifference curves show combinations of goods that provide the same level of satisfaction to a consumer. A consumer seeks to maximize utility by consuming the combination on their highest attainable indifference curve, which is tangent to their budget constraint. As more of a good is consumed, the marginal rate of substitution diminishes, following the law of diminishing marginal rate of substitution. When prices or income change, the budget constraint shifts, changing the optimal consumption bundle where the indifference curve is tangent to the new budget line.
Seat plan
This document contains a list of 78 names. The names appear to be of female students as many end with traditionally female names like Marie, Grace, Anne, etc. The names are not grouped or organized in any other way.
More from Carmela Grace Gavino (9)
Input Demand: The Capital Market and the Investment Decision
Input Demand: The Capital Market and the Investment Decision
Ch07
- 1. Short-Run Costs and Output Decisions
- 2. Decisions Facing Firms 3. 2. 1. 3. 2. 1. *Determines production costs The price of inputs* Techniques of production available* The price of output INFORMATION The quantity of each input to demand How to produce that output (which technique to use) The quantity of output to supply are based on DECISIONS
- 16. Short-Run Costs of a Hypothetical Firm 18 2 9,000 1,000 16 20 8,000 500 208.4 200 1,042 1,000 8.4 10 42 5 258 250 1,032 1,000 8 8 32 4 341 333 1,024 1,000 8 6 24 3 509 500 1,018 1,000 9 8 18 2 1,010 1,000 1,010 1,000 10 10 10 1 $ $ 1,000 $ 1,000 $ $ $ 0 $ 0 (8) ATC (TC/q or AFC + AVC) (7) AFC ( TFC / q ) (6) TC ( TVC + TFC ) (5) TFC (4) AVC ( TVC/q ) (3) MC ( TVC ) (2) TVC (1) q
- 23. Profit Analysis for a Simple Firm 0 90 90 15 30 80 10 6 15 60 75 15 20 50 10 5 20 40 60 15 10 30 10 4 15 30 45 15 5 20 10 3 5 25 30 15 5 15 10 2 -5 20 15 15 10 10 10 1 -10 $ 10 $ 0 $ 15 $ $ 0 $ 10 $ 0 (8) PROFIT ( TR TC ) (7) TC ( TFC + TVC ) (6) TR ( P x q ) (5) P = MR (4) MC (3) TVC (2) TFC (1) q