Costs
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The document discusses short-run and long-run costs for a firm. It presents tables and graphs showing the relationship between total cost, average cost, marginal cost, output quantity, and fixed and variable costs in the short-run. It then discusses how long-run average cost curves are derived from multiple short-run average cost curves. The key differences between economic profit and accounting profit are also summarized.
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Concept of cost
Cost is the sum of explicit and implicit costs. Explicit cost refers to actual money spent on inputs, while implicit cost is the estimated value of inputs provided by the business owner. Cost function studies the relationship between cost of inputs and output. Short run costs include total, average, and marginal costs. Total cost is the sum of total fixed and total variable costs. Average and marginal costs are also discussed. Fixed costs do not change with output while variable costs do. A schedule of costs with changing output levels is presented to show the relationships between average and marginal cost. The rising portion of the marginal cost curve represents the supply curve under perfect competition.
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
ECONOMICS COST CONCEPT
This document defines key concepts related to cost, including:
- Explicit costs refer to actual money spent on inputs, while implicit costs refer to the estimated value of owner-supplied inputs.
- Cost function studies the relationship between input costs and output levels.
- Short-run costs include total, fixed, and variable costs. Total cost equals fixed plus variable cost. Variable costs change with output while fixed costs do not.
- Marginal cost refers to the change in total cost from producing one additional unit of output.
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.
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The document discusses different types of cost curves that firms can face, including total cost curves, average total cost curves, marginal cost curves, and how these curves relate to each other in both the short-run and long-run. It explains that a firm's long-run total cost curve is the lower envelope of its various short-run total cost curves. Similarly, a firm's long-run average total cost curve is the lower envelope of its short-run average total cost curves.
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AVERAGE COST
This document discusses average cost of production and how it is calculated. Average cost is total cost divided by the number of units produced. In the short run, fixed costs are zero and variable costs are constant. In the long run, a firm can vary quantities and all inputs are variable, allowing the unit cost to be calculated based on a certain level of output.
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Concept of cost
Cost is the sum of explicit and implicit costs. Explicit cost refers to actual money spent on inputs, while implicit cost is the estimated value of inputs provided by the business owner. Cost function studies the relationship between cost of inputs and output. Short run costs include total, average, and marginal costs. Total cost is the sum of total fixed and total variable costs. Average and marginal costs are also discussed. Fixed costs do not change with output while variable costs do. A schedule of costs with changing output levels is presented to show the relationships between average and marginal cost. The rising portion of the marginal cost curve represents the supply curve under perfect competition.
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
ECONOMICS COST CONCEPT
This document defines key concepts related to cost, including:
- Explicit costs refer to actual money spent on inputs, while implicit costs refer to the estimated value of owner-supplied inputs.
- Cost function studies the relationship between input costs and output levels.
- Short-run costs include total, fixed, and variable costs. Total cost equals fixed plus variable cost. Variable costs change with output while fixed costs do not.
- Marginal cost refers to the change in total cost from producing one additional unit of output.
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.
Economics
presentation prepared by 2011 humanities batch under the leadership of mathew j. vettickal
under the super vision of sudheesh plathottam
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The document discusses different types of cost curves that firms can face, including total cost curves, average total cost curves, marginal cost curves, and how these curves relate to each other in both the short-run and long-run. It explains that a firm's long-run total cost curve is the lower envelope of its various short-run total cost curves. Similarly, a firm's long-run average total cost curve is the lower envelope of its short-run average total cost curves.
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AVERAGE COST
This document discusses average cost of production and how it is calculated. Average cost is total cost divided by the number of units produced. In the short run, fixed costs are zero and variable costs are constant. In the long run, a firm can vary quantities and all inputs are variable, allowing the unit cost to be calculated based on a certain level of output.
Cost
This document discusses different types of costs including explicit, implicit, private, social, money, real, and opportunity costs. It also discusses the differences between short run and long run costs. In the short run, some costs are fixed while others are variable. Total cost is the sum of total fixed and variable costs. Marginal cost is the change in total or variable costs from a change in output. Average and marginal costs are represented graphically. In the long run, all costs are variable and the long run average cost curve forms a U-shape.
Cost computation
This document discusses different types of costs involved in production. It defines fixed costs as expenses that cannot be changed in the short run, like rent and insurance, and variable costs as expenses that vary with output, such as raw materials and wages. Total cost is the sum of total fixed and total variable costs. As output increases, average fixed cost falls while average variable cost initially falls then rises, resulting in a U-shaped average total cost curve. Marginal cost is the change in total cost from producing an additional unit of output. The point where marginal cost equals average cost minimizes average total cost. Controlling costs is essential for business success.
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This document discusses cost concepts and types of costs. It defines explicit costs as actual money expenditures paid to outsiders, and implicit costs as the estimated value of owner-supplied inputs including normal profit. Cost is a function of output, and types of costs include total fixed costs, total variable costs, total costs, average fixed costs, average variable costs, average costs, and marginal costs. Long-run costs are all variable as all factors are variable. Economies of scale provide cost advantages from expansion, including pecuniary and real economies, while internal economies come from changes within the firm and external economies from changes outside the firm like government policies.
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The document discusses various cost concepts in economics including:
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- 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.
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The document discusses cost concepts and their application. It defines different types of costs such as fixed costs, variable costs, opportunity costs, sunk costs, explicit costs, and implicit costs. It also discusses total cost, which is the sum of fixed and variable costs. The total cost equation and linear cost equation are presented. Examples are provided to illustrate calculating total production costs, break-even points, and profits using the total cost equation. Location selection for facilities is also discussed, with factors like proximity to markets and suppliers, labor availability, and costs being considered in a break-even analysis.
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The document discusses the relationship between marginal cost, average total cost, and average variable cost. It states that marginal cost curves always intersect average cost curves at the minimum point. When marginal cost exceeds average cost, average cost is rising. When marginal cost is less than average cost, average cost is falling. Marginal cost also indicates whether average variable cost is rising or falling in the same way.
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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.
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The document discusses different types of costs including:
1. Accounting costs include expenses incurred during production adjusted for depreciation, while economic costs include explicit payments to factors of production as well as implicit opportunity costs.
2. In the short-run, costs are classified as fixed, variable, total, average fixed, average variable, and marginal based on their relationship to changing output levels.
3. In the long-run, all factors are variable and long-run total, average, and marginal cost curves are defined based on minimum cost production at different output scales.
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The document discusses different types of costs that companies incur, including variable costs which change with production levels and fixed costs which remain constant regardless of production levels. It defines total costs as the sum of fixed and variable costs. Break-even analysis is introduced as a tool to determine the sales or production volume needed for total revenue to equal total costs. An example is provided of a flower shop calculating its fixed costs, variable costs per unit, selling price per unit, unit contribution, and break-even point in units. The break-even point is where total sales equals total costs and the company is neither profitable nor losing money.
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- Break-even and shutdown points for firms.
- Economies and diseconomies of scale in the long-run.
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- Sunk costs which cannot be recovered and should be ignored in decisions
- Money costs which are payments to factors of production
- Opportunity cost as the next best alternative foregone in producing something
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This document discusses different types of costs including explicit, implicit, private, social, money, real, and opportunity costs. It also discusses the differences between short run and long run costs. In the short run, some costs are fixed while others are variable. Total cost is the sum of total fixed and variable costs. Marginal cost is the change in total or variable costs from a change in output. Average and marginal costs are represented graphically. In the long run, all costs are variable and the long run average cost curve forms a U-shape.
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This document discusses different types of costs involved in production. It defines fixed costs as expenses that cannot be changed in the short run, like rent and insurance, and variable costs as expenses that vary with output, such as raw materials and wages. Total cost is the sum of total fixed and total variable costs. As output increases, average fixed cost falls while average variable cost initially falls then rises, resulting in a U-shaped average total cost curve. Marginal cost is the change in total cost from producing an additional unit of output. The point where marginal cost equals average cost minimizes average total cost. Controlling costs is essential for business success.
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PPT of Managerial Economics By Prof. Manju Shree Naidu on topic Cost Curves at GIM, Gitam University, Vizag
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This document discusses cost concepts and types of costs. It defines explicit costs as actual money expenditures paid to outsiders, and implicit costs as the estimated value of owner-supplied inputs including normal profit. Cost is a function of output, and types of costs include total fixed costs, total variable costs, total costs, average fixed costs, average variable costs, average costs, and marginal costs. Long-run costs are all variable as all factors are variable. Economies of scale provide cost advantages from expansion, including pecuniary and real economies, while internal economies come from changes within the firm and external economies from changes outside the firm like government policies.
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The document discusses different types of costs including variable costs, fixed costs, total fixed costs, total variable costs, total costs, average fixed costs, average variable costs, average total costs, marginal costs, and marginal revenue. It defines each type of cost and revenue and provides the relevant formulas to calculate them.
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This document outlines the theory of cost for a firm. It discusses key cost concepts like total cost, fixed cost, variable cost, marginal cost, average cost, and how they relate in the short run and long run. In the short run, total cost is the sum of total fixed cost and total variable cost. Marginal cost is the change in total cost from producing one more unit. Average cost is total cost divided by units of output. In the long run, all factors can be varied, and the long run average cost curve shows the minimum average cost for different levels of production.
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This document presents information about costs and revenues to Mr. Abdur Rab and a group of students. It defines total cost, fixed costs, and variable costs. It also defines and provides graphical representations of total cost, total variable cost, total fixed cost, marginal cost, average total cost, average variable cost, and average fixed cost. The document further discusses different types of costs, cost concepts, revenue types including total revenue, average revenue and marginal revenue, and provides graphical representations of total revenue, average revenue and marginal revenue.
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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.
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The document discusses cost concepts and their application. It defines different types of costs such as fixed costs, variable costs, opportunity costs, sunk costs, explicit costs, and implicit costs. It also discusses total cost, which is the sum of fixed and variable costs. The total cost equation and linear cost equation are presented. Examples are provided to illustrate calculating total production costs, break-even points, and profits using the total cost equation. Location selection for facilities is also discussed, with factors like proximity to markets and suppliers, labor availability, and costs being considered in a break-even analysis.
Theory of cost .prasanth
This document discusses different types of costs in economics including total, fixed, variable, average, and marginal costs. It defines each type of cost using mathematical formulas. Total cost is the sum of total fixed costs and total variable costs. As production volume increases, average fixed cost decreases in a rectangular hyperbola shape. Marginal cost is the change in total cost from producing one additional unit and the marginal cost curve is U-shaped, initially high and then decreasing to a minimum point before rising again. The document provides a numerical example to illustrate the different cost concepts.
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The document discusses the relationship between marginal cost, average total cost, and average variable cost. It states that marginal cost curves always intersect average cost curves at the minimum point. When marginal cost exceeds average cost, average cost is rising. When marginal cost is less than average cost, average cost is falling. Marginal cost also indicates whether average variable cost is rising or falling in the same way.
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.
Economic Presentation: Cost Theory and Analysis
The document discusses different types of costs including:
1. Accounting costs include expenses incurred during production adjusted for depreciation, while economic costs include explicit payments to factors of production as well as implicit opportunity costs.
2. In the short-run, costs are classified as fixed, variable, total, average fixed, average variable, and marginal based on their relationship to changing output levels.
3. In the long-run, all factors are variable and long-run total, average, and marginal cost curves are defined based on minimum cost production at different output scales.
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The document discusses different types of costs that companies incur, including variable costs which change with production levels and fixed costs which remain constant regardless of production levels. It defines total costs as the sum of fixed and variable costs. Break-even analysis is introduced as a tool to determine the sales or production volume needed for total revenue to equal total costs. An example is provided of a flower shop calculating its fixed costs, variable costs per unit, selling price per unit, unit contribution, and break-even point in units. The break-even point is where total sales equals total costs and the company is neither profitable nor losing money.
Cost/Revenue Analysis
The document discusses key concepts related to cost and revenue analysis, including:
- Fixed and variable inputs in the short-run vs long-run.
- The production function and how it relates inputs to output.
- Marginal product and the law of diminishing returns.
- Short-run and long-run costs including total, average, and marginal costs.
- Revenue analysis including total, average, and marginal revenue.
- Break-even and shutdown points for firms.
- Economies and diseconomies of scale in the long-run.
Analysis of cost, profit, and total revenue
Cost is the most important consideration in production. Producers consider both economic and accounting costs. Economic costs are future-oriented and consider potential future profits, while accounting costs only recognize past expenses. There is a difference between explicit costs like wages and implicit costs like using a firm's existing equipment. In the short run, firms take their capital level as fixed and vary labor. Short run costs include total fixed, total variable, total, average fixed, average variable, average total, and marginal costs. The long run allows all factors to vary and has the lowest average total costs. Long run marginal cost measures the change in long run total cost from a change in output. A competitive firm will produce at the level where marginal cost equals
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This document discusses different types of costs involved in production, including:
- Explicit costs which are actual payments, versus implicit costs which are work done without monetary payment
- Private costs accrued by firms/individuals engaged in an activity, versus external/social costs passed to society
- Sunk costs which cannot be recovered and should be ignored in decisions
- Money costs which are payments to factors of production
- Opportunity cost as the next best alternative foregone in producing something
It also explains concepts like fixed costs, variable costs, total costs, average costs and marginal cost, and how they relate in the short-run and long-run, including economies and diseconomies of scale. Diagrams are used to depict
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The document discusses short-run and long-run costs for firms. It provides examples of total costs, average costs, and marginal costs at different output levels in the short-run. It then explains how long-run average cost curves are derived by considering economies of scale and different factory sizes. Long-run average and marginal costs are shown to depend on whether economies or diseconomies of scale are present as output increases.
Cost 3
This document discusses theories of costs in the short run and long run for firms. It defines fixed costs as expenses that do not change with output, and variable costs as expenses that change proportionally with output. In the short run, total costs are the sum of fixed and variable costs. In the long run, when all costs are variable, the long run average cost curve is derived from the minimum points of multiple short run average cost curves and can exhibit economies or diseconomies of scale.
Theory of cost
A brief discussion on theory of Cost. A table with graphical is presented here.
Hope that this make your study easy.
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Cost mms 10
This document discusses different types of costs and cost behavior. It explains that in the short run, costs can be broken down into fixed and variable costs. As output increases, average and marginal costs may decrease at first due to economies of scale, but eventually marginal costs will rise as diminishing returns set in. In the long run, firms can adjust all inputs including plant size, allowing long run average costs to be lower than short run average costs due to greater potential for cost savings from scale economies. Diseconomies of scale may also occur if firms grow too large.
Theory of costs, micro economics
The document discusses theories of costs in the short run and long run for firms. In the short run, costs are classified as fixed or variable. Fixed costs do not change with output while variable costs do change with output. In the long run, nothing is fixed. Long run average cost (LRAC) curves illustrate average costs when all factors of production can be varied. LRAC curves are U-shaped and reflect economies of scale at low outputs and diseconomies of scale at high outputs. LRAC curves envelop multiple short run average cost curves as firms choose the optimal factory size.
101 lecture 13
The document discusses the costs of production, including key terms like total cost, fixed costs, variable costs, average costs and marginal costs. It provides examples and graphs to illustrate concepts like total cost curves, accounting profit vs economic profit, efficient scale, and economies of scale. The document also distinguishes between short run and long run, and how costs are treated in each time period.
cost analysis- part ii
The document discusses concepts of cost analysis including short-run cost functions. It provides a table showing the relationship between total fixed cost, total variable cost, total cost, average variable cost, average fixed cost, average cost, and marginal cost at different output levels. It notes that average cost is lowest when marginal cost equals average cost, representing the least cost input combination or optimal level of production. An example table is given showing output levels and total costs, from which the least cost input combination can be identified as the output level where average cost is lowest.
Production Cost
This document discusses production costs and different types of average costs. It defines average fixed costs, average variable costs, and average total costs. Fixed costs remain constant regardless of production quantity, while variable costs change with quantity. Average costs are calculated by dividing total costs by quantity. Marginal cost is defined as the change in total cost from producing one more unit. Formulae show marginal cost is the difference between total costs of two levels of output. A graph illustrates how marginal cost decreases initially as total cost rises at a diminishing rate, reaches a minimum, and then increases as the rate of change in total costs increases.
Cost Analysis
This document discusses various concepts of cost, including:
1. Real cost, opportunity cost, money costs, accounting vs. economic costs, and fixed vs. variable costs.
2. Production costs including total cost, total fixed cost, total variable cost, average fixed cost, average variable cost, average total cost, and marginal cost.
3. Cost curves and the relationships between marginal cost and average cost curves.
4. Methods of estimating cost functions including linear, quadratic, and step cost functions.
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.
C H A P T E R 6 T H E O R Y O F C O S T
The document discusses various concepts related to production costs, including:
1) Definitions of production cost, total fixed cost, total variable cost, and total cost. Total cost is the sum of total fixed and total variable costs.
2) Short-run cost curves like average variable cost, average fixed cost, average total cost, and marginal cost are U-shaped.
3) In the long-run, the long-run average cost curve is also U-shaped due to economies and diseconomies of scale as a firm changes its size of production.
Production Cost 7.pdf
The document discusses key concepts related to a firm's production costs, including:
1) It defines different types of costs such as fixed costs, variable costs, total costs, average costs and marginal costs. Fixed costs do not vary with output, while variable costs do.
2) It explains short-run production relationships, diminishing marginal returns, and the law of diminishing returns.
3) It provides an example table and figures to illustrate how total, average, and marginal costs change as production quantity changes in the short-run. Marginal cost is the change in total cost from a one-unit change in output.
4) The marginal-average rule states that average costs will fall
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 n profit analysis
This document discusses cost and profit analysis concepts including total costs, fixed costs, variable costs, average costs, marginal costs, break-even point, and target profit. It provides classifications of costs, relationships between different cost types, and formulas to calculate average fixed cost, average variable cost, average cost, and break-even point. Graphs and examples are used to illustrate cost behavior and the effect of changes in costs, sales, and fixed costs on the break-even point.
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.
Unit 3 review_session
The document discusses costs of production in the short run under perfect competition. It defines short run as a period where at least one resource is fixed, such as plant capacity. It explains the differences between explicit costs that accountants consider and both explicit and implicit opportunity costs that economists consider. The document also defines different types of costs like total, variable, fixed, average, and marginal costs. It provides an example to calculate these different costs and explains why the marginal cost curve is U-shaped due to the law of diminishing marginal returns.
Managerial Economics Cost PPT
1. The document discusses various cost concepts including opportunity cost, outlay cost, total cost, average cost, marginal cost, fixed cost, and variable cost. It explains these concepts for both the short run and long run.
2. In the short run, total cost is the sum of total fixed cost and total variable cost. Average cost and marginal cost are calculated based on changes in total cost and output.
3. In the long run, all inputs are variable and firms can change the size of their plant and operations. Long run average cost is determined by the minimum points of a series of short run average cost curves.
Cost function.ppt
This document discusses various cost concepts in economics. It defines private and social costs, and explains how private costs can be measured using economic and accounting costs. Economic cost includes explicit costs like wages as well as implicit opportunity costs. The document then discusses different types of costs in the short run including total, variable, fixed, average, and marginal costs. It provides examples and graphs to illustrate cost curves and their relationships. Specifically, it explains that AVC, ATC and MC curves are U-shaped due to the law of variable proportions. The document also discusses costs in the long run and how the long run average cost curve is determined by the envelope of short run average cost curves. Finally, it discusses the learning curve concept and how
Production and cost
I. The document discusses production and cost analysis concepts including: production functions, total, marginal, and average product, isoquants, isocosts, and cost minimization.
II. It also discusses cost analysis concepts such as: total, variable, and fixed costs. Total cost is the sum of variable and fixed costs. Variable costs vary with output while fixed costs do not.
III. Multi-product cost functions are discussed as well as economies of scope which occur when it is cheaper to produce multiple products jointly rather than separately.
Ch21
This document discusses different types of cost curves including total cost curves, variable cost curves, average total cost curves, average variable cost curves, average fixed cost curves, and marginal cost curves. It explains how these curves are related to each other and how they are derived from cost functions. Specifically, it discusses how marginal cost is related to average variable cost and average total cost, and how the curves intersect at minimum points. The document also contrasts short-run and long-run cost curves, explaining that a firm's long-run total cost curve is the lower envelope of all its possible short-run total cost curves as it varies the amount of fixed inputs over time.
Similar to Costs (20)
Costs
- 1. Costs
- 2. Short-run costs Total cost
- 3. Total costs for firm X Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12
- 4. Total costs for firm X TFC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12
- 5. Total costs for firm X TFC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12 TVC (Rs.) 0 10 16 21 28 40 60 91
- 6. Total costs for firm X TVC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12 TVC (Rs.) 0 10 16 21 28 40 60 91 TFC
- 7. Total costs for firm X TVC TFC Diminishing marginal returns set in here
- 8. Total costs for firm X TVC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12 TVC (Rs.) 0 10 16 21 28 40 60 91 TFC
- 9. Total costs for firm X TVC TFC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12 TVC (Rs.) 0 10 16 21 28 40 60 91 TC (Rs.) 12 22 28 33 40 52 72 103
- 10. Total costs for firm X TC Output (Q) 0 1 2 3 4 5 6 7 TFC (Rs.) 12 12 12 12 12 12 12 12 TVC (Rs.) 0 10 16 21 28 40 60 91 TC (Rs.) 12 22 28 33 40 52 72 103 TVC TFC
- 11. Total costs for firm X TC TVC TFC Diminishing marginal returns set in here
- 12. Short-run costs Marginal cost = TC / Q
- 13. Deriving marginal costs Q Costs (Rs.) Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31
- 14. TC Deriving marginal costs Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31 Q Costs (Rs.)
- 15. Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31 TC TC = 12 Q = 1 Q Costs (Rs.) Deriving marginal costs
- 16. TC MC Q Costs (Rs.) Deriving marginal costs Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31 Diminishing returns set in here
- 17. MC Q Costs (Rs.) Deriving marginal costs Diminishing marginal returns set in here
- 18. Short-run costs Average cost = TC / Q
- 19. Q Costs (Rs.)
- 20. Q Costs (Rs.) AFC Q TVC AVC 0 0 - 1 10 10 2 16 8 3 21 7 4 28 7 5 40 8 6 60 10 7 91 13
- 21. 3 Q TVC AVC 0 0 - 1 10 10 2 16 8 3 21 7 4 28 7 5 40 8 6 60 10 7 91 13 Q Costs (Rs.) AFC AVC
- 22. Q Costs (Rs.) AFC AVC Q TC AC 0 12 1 22 22 2 28 14 3 33 11 4 40 10 5 52 10.4 6 72 12 7 103 14.7
- 23. Q Costs (Rs.) AC AFC AVC Q TC AC 0 12 1 22 22 2 28 14 3 33 11 4 40 10 5 52 10.4 6 72 12 7 103 14.7
- 24. Q Costs (Rs.) Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31
- 25. MC Q Costs (Rs.) Q TC MC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31
- 26. Q TC MC AC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31 MC - 22 14 11 10 10.4 12 14.7 Q Costs (Rs.)
- 27. Q TC MC AC 0 12 1 22 2 28 3 33 4 40 5 52 6 72 7 103 10 6 5 7 12 20 31 MC - 22 14 11 10 10.4 12 14.7 Q Costs (Rs.) AC
- 28. Average and marginal costs Output ( Q ) Costs (Rs.) AFC AVC MC x AC z y
- 29. Long-run costs Long-run costs =TC / Q
- 30. Alternative long-run average cost curves Output O Costs Economies of Scale LRAC
- 31. Alternative long-run average cost curves Output O Costs Diseconomies of Scale LRAC
- 32. Alternative long-run average cost curves Output O Costs Constant costs LRAC
- 33. A typical long-run average cost curve Output O Costs LRAC
- 34. A typical long-run average cost curve Output O Costs Economies of scale Constant costs Diseconomies of scale LRAC
- 35. Long-run average and marginal costs Output O Costs LRAC Economies of Scale LRMC
- 36. Long-run average and marginal costs Output O Costs LRAC Diseconomies of Scale LRMC
- 37. Long-run average and marginal costs Output O Costs LRAC = LRMC Constant costs
- 38. Long-run average and marginal costs Output O Costs LRAC Initial economies of scale, then diseconomies of scale LRMC
- 39. Long-run costs Relationship between short-run and long-run AC curves
- 40. Deriving long-run average cost curves: factories of fixed size Costs Output O 3 factories 2 factories 1 factory SRAC 3 SRAC 4 SRAC 5 5 factories 4 factories SRAC 1 SRAC 2
- 41. Deriving long-run average cost curves: factories of fixed size SRAC 1 SRAC 3 SRAC 2 SRAC 4 SRAC 5 LRAC Costs Output O
- 42. Deriving long-run average cost curves: choice of factory size Costs Output O Examples of short-run average cost curves
- 43. Deriving long-run average cost curves: choice of factory size LRAC Costs Output O
- 44. Explicit and Implicit Costs Explicit Costs : The money payment that a firm makes to the outsiders who supply inputs. These are the “out of pocket ” costs. Eg. Salaries, price paid for raw material, components etc.
- 48. Economic Profit versus Accounting Profit Revenue Total opportunity costs How an Economist Views a Firm Explicit costs Economic profit Implicit costs Explicit costs Accounting profit How an Accountant Views a Firm Revenue