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.
This document discusses perfect competition in the rice market. It describes that the rice market exhibits characteristics of perfect competition, including: (1) there being many small rice farming firms and buyers/sellers, (2) the rice product being standardized/homogeneous, and (3) easy entry and exit for firms in the market. The document also notes that international rice trade can demonstrate perfect competition when trade barriers are low, causing domestic rice prices to align with global prices.
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.
The document discusses various cost concepts including:
- Opportunity cost and actual cost
- Business costs and full costs
- Explicit and implicit costs
- Short-run and long-run costs including fixed, variable, average, and marginal costs
- Traditional theories of costs including short-run cost curves and production rules
- Modern theories including the long-run average cost curve and concepts of economies and diseconomies of scale
Profit maximization and perfect competitionjaveria gul
1) A firm produces at the quantity where marginal revenue equals marginal cost to maximize profits. This is the point where additional revenue from producing another unit equals the additional costs.
2) A firm's profit is maximized by producing at the output level where marginal revenue equals marginal cost. Producing more would mean marginal costs exceed marginal revenues, reducing profits.
3) In the short run, a competitive firm will produce the quantity where marginal revenue equals marginal cost to maximize profits. The firm's profit is represented by the rectangle between average total cost and marginal cost at the profit-maximizing quantity.
This is part of an introduction to indifference curve analysis. A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget
The gradient of the budget line reflects the relative prices of the two products
Costs Of Production Micro Economics ECO101Sabih Kamran
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
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.
This document discusses perfect competition in the rice market. It describes that the rice market exhibits characteristics of perfect competition, including: (1) there being many small rice farming firms and buyers/sellers, (2) the rice product being standardized/homogeneous, and (3) easy entry and exit for firms in the market. The document also notes that international rice trade can demonstrate perfect competition when trade barriers are low, causing domestic rice prices to align with global prices.
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.
The document discusses various cost concepts including:
- Opportunity cost and actual cost
- Business costs and full costs
- Explicit and implicit costs
- Short-run and long-run costs including fixed, variable, average, and marginal costs
- Traditional theories of costs including short-run cost curves and production rules
- Modern theories including the long-run average cost curve and concepts of economies and diseconomies of scale
Profit maximization and perfect competitionjaveria gul
1) A firm produces at the quantity where marginal revenue equals marginal cost to maximize profits. This is the point where additional revenue from producing another unit equals the additional costs.
2) A firm's profit is maximized by producing at the output level where marginal revenue equals marginal cost. Producing more would mean marginal costs exceed marginal revenues, reducing profits.
3) In the short run, a competitive firm will produce the quantity where marginal revenue equals marginal cost to maximize profits. The firm's profit is represented by the rectangle between average total cost and marginal cost at the profit-maximizing quantity.
This is part of an introduction to indifference curve analysis. A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget
The gradient of the budget line reflects the relative prices of the two products
Costs Of Production Micro Economics ECO101Sabih Kamran
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
Ram Kumar Phuyal presents on production theory and costs. He discusses production functions with one and two variable inputs and the concept of returns to scale. He explains the production function and differentiates between fixed and variable inputs. Total, average, and marginal products are defined for a single variable input. There are three stages of production as marginal product first increases, then decreases and becomes negative. Short-run costs include total fixed, variable, and total costs. Average and marginal costs are also analyzed.
The document discusses the concepts of total revenue (TR), average revenue (AR), and marginal revenue (MR) under perfect competition and monopoly market structures. It provides formulas for TR, AR, and MR and illustrates them with a table showing quantity, price, TR, AR, and MR at different output levels. Under perfect competition, TR, AR and MR are constant as output increases. The relationships between TR, AR and MR curves are also explained.
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.
The document discusses the theory of cost, including various cost concepts and cost curves. It covers accounting concepts such as opportunity cost and actual cost as well as analytical concepts such as fixed and variable costs. The document also examines cost functions including linear, quadratic and cubic forms. It analyzes short-run and long-run cost curves, discussing total cost, average cost and marginal cost. Finally, the document addresses economies and diseconomies of scale and assigns further reading on the economics of scale.
This chapter discusses the costs of production for firms. It will examine what costs are included in a firm's total costs, how costs are related to the production process and output quantity, and the meaning of average and marginal costs. The chapter analyzes cost concepts like total, average, and marginal costs. It also discusses the relationship between costs and a firm's production function as well as the differences between fixed and variable costs.
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
This document defines and explains the characteristics of a perfect competition market. Key points include:
- A perfect competition market is one where many small producers sell identical products, meaning buyers have many alternatives and no single seller can influence the market price.
- Main features include homogeneous products, many buyers and sellers, perfect information and mobility of factors of production. Agricultural markets are often used as examples.
- In the short run, firms aim to maximize profits by producing where marginal revenue equals marginal cost. In the long run, firms will exit if earning losses or normal profits and entry will occur if profits are above normal.
- The market equilibrium price is determined by the intersection of total industry demand and supply. Individual
- A monopoly market is characterized by a single seller of a unique product without close substitutes. Barriers to entry like government protections, large economies of scale, or exclusive ownership of resources allow monopolies to exist.
- A monopoly is both the firm and the industry and is the price maker. It faces a downward sloping demand curve where price exceeds marginal revenue. The profit-maximizing quantity is where marginal revenue equals marginal cost.
- At this quantity, the monopoly sets the highest price that demand allows. If price exceeds average total cost, the monopoly earns economic profits. In the long run, only monopolies that earn super-normal profits can remain in business.
The document discusses the costs of taxation. It explains that taxes reduce economic efficiency by creating a wedge between the price paid by buyers and received by sellers. This leads to a reduction in quantity traded from the efficient level. The difference between the total benefits and costs without the tax, compared to with the tax, is called the deadweight loss. The size of the deadweight loss depends on how responsive supply and demand are to price changes - the more responsive they are, the greater the efficiency reduction from the tax. While tax revenue increases with moderate tax rates, very high taxes can reduce market size and quantity traded so much that they ultimately lower tax revenues too.
Perfect Competition: Marginal revenue-and-marginal-cost-approachPaula Marie Llido
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.
This document discusses consumer behavior and utility analysis. It defines consumer behavior as how consumers allocate their income to purchase different goods and services, taking into account prices. It also covers consumer choice and budget constraints, preferences, rational behavior, and the budget constraint. The document then discusses the cardinal and ordinal approaches to analyzing consumer behavior, including concepts like total utility, marginal utility, indifference curves, marginal rate of substitution, and the law of diminishing marginal utility. Graphs and examples are provided to illustrate key concepts in consumer behavior theory.
The Cost Of Production - Dealing with Cost - Explicit and Implicit Cost - Eco...FaHaD .H. NooR
Economics #UCP
What is 'Production Cost'
Production cost refers to the cost incurred by a business when manufacturing a good or providing a service. Production costs include a variety of expenses including, but not limited to, labor, raw materials, consumable manufacturing supplies and general overhead. Additionally, any taxes levied by the government or royalties owed by natural resource extracting companies are also considered production costs.
BREAKING DOWN 'Production Cost'
Also referred to as the cost of production, production costs include expenditures relating to the manufacturing or creation of goods or services. For a cost to qualify as a production cost it must be directly tied to the generation of revenue for the company. Manufacturers experience product costs relating to both the materials required to create an item as well as the labor need to create it. Service industries experience production costs in regards to the labor required to provide the service as well as any materials costs involved in providing the aforementioned service.
In production, there are direct costs and indirect costs. For example, direct costs for manufacturing an automobile are materials such as the plastic and metal materials used as well as the labor required to produce the finished product. Indirect costs include overhead such as rent, administrative salaries or utility expenses.
Deriving Unit Costs for Product Pricing
To figure out the cost of production per unit, the cost of production is divided by the number of units produced. Once the cost per unit is determined, the information can be used to help develop an appropriate sales price for the completed item. In order to break even, the sales price must cover the cost per unit. Amounts above the cost per unit are often seen as profit while amounts below the cost per unit result in losses.
This document discusses the concept of utility in economics. It defines utility as the satisfaction derived from consuming a good or service. Utility is subjective and varies between individuals. The document outlines two approaches to utility - the cardinal approach which views utility as measurable, and the ordinal approach which sees utility as only able to be compared. It also discusses total utility, marginal utility, diminishing marginal utility, and indifference curves in analyzing utility.
This document discusses different types of market structures:
1. Perfect competition is characterized by many small sellers of identical products, price taking behavior, freedom of entry and exit. Potatoes sold at markets are an example.
2. Monopoly is dominated by a single seller of a unique product where entry is restricted, like Gillette razor blades.
3. Monopolistic competition involves differentiated products that are close substitutes, like various shoe brands.
4. Oligopoly has a small number of interdependent sellers that recognize how their actions impact rivals, like instant noodle brands in India. Duopoly is a specific type of oligopoly with two dominant firms, like Pepsi and Coke in soft drinks
Perfect competition requires: firms are price takers, many sellers/buyers, free entry/exit, identical products, complete information. In short-run, individual firms maximize profits where marginal cost (MC) equals marginal revenue (MR). Market supply is the sum of individual firm MC curves. In long-run, zero economic profits are achieved as new entry drives prices down until MC equals average costs.
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
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.
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.
Ram Kumar Phuyal presents on production theory and costs. He discusses production functions with one and two variable inputs and the concept of returns to scale. He explains the production function and differentiates between fixed and variable inputs. Total, average, and marginal products are defined for a single variable input. There are three stages of production as marginal product first increases, then decreases and becomes negative. Short-run costs include total fixed, variable, and total costs. Average and marginal costs are also analyzed.
The document discusses the concepts of total revenue (TR), average revenue (AR), and marginal revenue (MR) under perfect competition and monopoly market structures. It provides formulas for TR, AR, and MR and illustrates them with a table showing quantity, price, TR, AR, and MR at different output levels. Under perfect competition, TR, AR and MR are constant as output increases. The relationships between TR, AR and MR curves are also explained.
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.
The document discusses the theory of cost, including various cost concepts and cost curves. It covers accounting concepts such as opportunity cost and actual cost as well as analytical concepts such as fixed and variable costs. The document also examines cost functions including linear, quadratic and cubic forms. It analyzes short-run and long-run cost curves, discussing total cost, average cost and marginal cost. Finally, the document addresses economies and diseconomies of scale and assigns further reading on the economics of scale.
This chapter discusses the costs of production for firms. It will examine what costs are included in a firm's total costs, how costs are related to the production process and output quantity, and the meaning of average and marginal costs. The chapter analyzes cost concepts like total, average, and marginal costs. It also discusses the relationship between costs and a firm's production function as well as the differences between fixed and variable costs.
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
This document defines and explains the characteristics of a perfect competition market. Key points include:
- A perfect competition market is one where many small producers sell identical products, meaning buyers have many alternatives and no single seller can influence the market price.
- Main features include homogeneous products, many buyers and sellers, perfect information and mobility of factors of production. Agricultural markets are often used as examples.
- In the short run, firms aim to maximize profits by producing where marginal revenue equals marginal cost. In the long run, firms will exit if earning losses or normal profits and entry will occur if profits are above normal.
- The market equilibrium price is determined by the intersection of total industry demand and supply. Individual
- A monopoly market is characterized by a single seller of a unique product without close substitutes. Barriers to entry like government protections, large economies of scale, or exclusive ownership of resources allow monopolies to exist.
- A monopoly is both the firm and the industry and is the price maker. It faces a downward sloping demand curve where price exceeds marginal revenue. The profit-maximizing quantity is where marginal revenue equals marginal cost.
- At this quantity, the monopoly sets the highest price that demand allows. If price exceeds average total cost, the monopoly earns economic profits. In the long run, only monopolies that earn super-normal profits can remain in business.
The document discusses the costs of taxation. It explains that taxes reduce economic efficiency by creating a wedge between the price paid by buyers and received by sellers. This leads to a reduction in quantity traded from the efficient level. The difference between the total benefits and costs without the tax, compared to with the tax, is called the deadweight loss. The size of the deadweight loss depends on how responsive supply and demand are to price changes - the more responsive they are, the greater the efficiency reduction from the tax. While tax revenue increases with moderate tax rates, very high taxes can reduce market size and quantity traded so much that they ultimately lower tax revenues too.
Perfect Competition: Marginal revenue-and-marginal-cost-approachPaula Marie Llido
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.
This document discusses consumer behavior and utility analysis. It defines consumer behavior as how consumers allocate their income to purchase different goods and services, taking into account prices. It also covers consumer choice and budget constraints, preferences, rational behavior, and the budget constraint. The document then discusses the cardinal and ordinal approaches to analyzing consumer behavior, including concepts like total utility, marginal utility, indifference curves, marginal rate of substitution, and the law of diminishing marginal utility. Graphs and examples are provided to illustrate key concepts in consumer behavior theory.
The Cost Of Production - Dealing with Cost - Explicit and Implicit Cost - Eco...FaHaD .H. NooR
Economics #UCP
What is 'Production Cost'
Production cost refers to the cost incurred by a business when manufacturing a good or providing a service. Production costs include a variety of expenses including, but not limited to, labor, raw materials, consumable manufacturing supplies and general overhead. Additionally, any taxes levied by the government or royalties owed by natural resource extracting companies are also considered production costs.
BREAKING DOWN 'Production Cost'
Also referred to as the cost of production, production costs include expenditures relating to the manufacturing or creation of goods or services. For a cost to qualify as a production cost it must be directly tied to the generation of revenue for the company. Manufacturers experience product costs relating to both the materials required to create an item as well as the labor need to create it. Service industries experience production costs in regards to the labor required to provide the service as well as any materials costs involved in providing the aforementioned service.
In production, there are direct costs and indirect costs. For example, direct costs for manufacturing an automobile are materials such as the plastic and metal materials used as well as the labor required to produce the finished product. Indirect costs include overhead such as rent, administrative salaries or utility expenses.
Deriving Unit Costs for Product Pricing
To figure out the cost of production per unit, the cost of production is divided by the number of units produced. Once the cost per unit is determined, the information can be used to help develop an appropriate sales price for the completed item. In order to break even, the sales price must cover the cost per unit. Amounts above the cost per unit are often seen as profit while amounts below the cost per unit result in losses.
This document discusses the concept of utility in economics. It defines utility as the satisfaction derived from consuming a good or service. Utility is subjective and varies between individuals. The document outlines two approaches to utility - the cardinal approach which views utility as measurable, and the ordinal approach which sees utility as only able to be compared. It also discusses total utility, marginal utility, diminishing marginal utility, and indifference curves in analyzing utility.
This document discusses different types of market structures:
1. Perfect competition is characterized by many small sellers of identical products, price taking behavior, freedom of entry and exit. Potatoes sold at markets are an example.
2. Monopoly is dominated by a single seller of a unique product where entry is restricted, like Gillette razor blades.
3. Monopolistic competition involves differentiated products that are close substitutes, like various shoe brands.
4. Oligopoly has a small number of interdependent sellers that recognize how their actions impact rivals, like instant noodle brands in India. Duopoly is a specific type of oligopoly with two dominant firms, like Pepsi and Coke in soft drinks
Perfect competition requires: firms are price takers, many sellers/buyers, free entry/exit, identical products, complete information. In short-run, individual firms maximize profits where marginal cost (MC) equals marginal revenue (MR). Market supply is the sum of individual firm MC curves. In long-run, zero economic profits are achieved as new entry drives prices down until MC equals average costs.
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
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.
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.
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.
The document discusses key concepts in production theory and short-run costs, including:
- Inputs can be variable or fixed, depending on how readily usage can be changed
- In the short-run, at least one input is fixed, while output is varied using variable inputs like labor
- Total, average, and marginal products are calculated from production functions and exhibit diminishing returns
- Short-run costs include total variable costs, total fixed costs, and total costs, which influence average and marginal cost curves.
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.
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.
This document discusses the different types of costs that firms face, including:
- Fixed costs that do not vary with output levels
- Variable costs that vary with output
- Short-run costs determined by production technology and returns to scale
- Long-run costs including the user cost of capital which is depreciation plus the interest rate times the value of capital
It provides examples of cost curves and how costs change with varying levels of output in the short-run and considerations for minimizing costs through optimal input choices in the long-run.
C H A P T E R 6 T H E O R Y O F C O S TEjarn Jijan
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.
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.
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.
This document contains information about costs of production, including:
1. It provides two examples - one of a farmer producing wheat and another of a generic firm producing a good. It shows the total, fixed, variable, average, and marginal costs curves for each example.
2. It defines key cost concepts like total cost, fixed cost, variable cost, average fixed cost, average variable cost, average total cost, and marginal cost. It explains how these costs are calculated.
3. It discusses why the marginal product and marginal cost curves typically have an upward slope as output increases, due to diminishing returns. It explains how producers can use marginal cost to determine optimal output levels that maximize profits.
In this presentation, we will discuss in details about cost of production and various concepts of cost like fixed cost, variable cost, average cost, marginal costs, etc.
To know more about Welingkar School’s Distance Learning Program and courses offered, visit:
http://www.welingkaronline.org/distance-learning/online-mba.html
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.
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.
The document describes costs for three firms over different quantities of output.
Firm A experiences economies of scale as its long-run average cost continuously declines as output increases. Economies of scale occur when output increases by a greater proportion than inputs, so that average costs fall with scale.
Diseconomies of scale happen when output rises less than inputs, causing average costs to increase with scale. Firm A is the only one that sees LRAC decline throughout, indicating it benefits from economies of scale.
This document discusses the different types of costs that firms face in production. It defines total, fixed, variable, average, and marginal costs. Total cost is the market value of all inputs used and includes both explicit costs that require money outlays and implicit opportunity costs. Fixed costs do not vary with output while variable costs do. The relationships between these costs are shown using tables of data and graphs of cost curves, including the typical U-shaped average total cost curve. Costs differ in the short-run versus long-run due to variable fixed costs.
The document discusses key concepts in marginal costing such as marginal cost, marginal costing, direct costing, absorption costing, contribution, profit volume analysis, limiting/key factors, break even analysis, and profit volume charts. It provides definitions and explanations of these terms. It also compares absorption costing and marginal costing, highlighting differences in how they treat fixed and variable costs, inventory valuation, and measurement of profitability. Examples are given to illustrate calculation of contribution, profit-volume ratio, break even point using algebraic method, and profit at different sales volumes. The document is an overview of important concepts in marginal costing used for management decision making.
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.
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
The document outlines ways to challenge and enrich ambitious economics students. It recommends encouraging students to think counter-intuitively, write in more depth, and explore the work of interesting economists. Suggested activities include student reading groups, an online magazine, investor challenges, economics societies, entrepreneurship competitions, external essay competitions, and external enrichment lectures and summer schools. The goal is for students to be ambitious, questioning, develop context awareness, and build a portfolio of economics and finance experiences.
In this revision presentation we look at recent trends in UK trade union membership, consider how trade unions can affect both pay and employment and challenge the textbook view that union-negotiated pay increases inevitably have negative consequences for employment.
In this revision presentation we cover key examples of pure and quasi public goods and consider the arguments for and against an increase in government spending on public goods.
Poverty Reduction Policies in Low Income Countriestutor2u
This revision presentation covers some of the main causes of continued high levels of extreme poverty in low and middle income countries and considers a range of pro-poor government interventions designed to increase productivity and regular employment and waged income in formal labour markets.
You don’t need to produce a lot of evidence in your macroeconomics exams but knowing some basic and key facts and figures can make your answers stand out from the crowd! Here is a quickfire journey through twenty important economic numbers that won’t change before the exam – use them to support your answer and impress the examiner!
Quantitative easing (QE) involves central banks creating new money to buy financial assets, lowering interest rates and increasing the money supply. The Bank of England has purchased £445 billion in assets through QE as of 2019.
Advantages of QE include giving central banks an additional monetary policy tool beyond interest rates, helping to prevent deflation, boosting business confidence and exports. Disadvantages include potentially worsening wealth inequality, risking inflation, distorting capital allocation, and reducing pension incomes. The impact of QE on the real economy has uncertain time lags and effectiveness.
This document discusses the advantages and disadvantages of countries joining the eurozone and adopting the euro as their single currency. The key advantages include eliminating currency conversion costs to boost trade, attracting more investment, increasing price transparency for consumers, and providing a more stable currency. However, joining also means losing independent monetary policy tools and interest rates being set by the ECB for the entire bloc rather than individual countries. Sharing a currency also means the risks of economic downturns in trading partners are increased. Recent data on unemployment, inflation, debt levels, and Germany's economic slowdown are also presented.
Supply-side policies aim to increase potential economic growth through microeconomic reforms that improve market efficiency. Examples discussed include privatizing industries like Royal Mail; reducing business regulations; lowering taxes on individuals and corporations; welfare reforms to incentivize work; education reforms; increasing wages; changing migration policies; investing in infrastructure for transport, energy, and housing; and establishing regional enterprise zones with tax breaks.
Microeconomics - Great Applied Examples for Examstutor2u
In this presentation, I have chosen loads of current examples that you might want to use as context in your microeconomics exams. We look at examples from different market structures, recent mergers and takeovers, the world's most valuable companies, the largest employer, unicorn business, de-mergers, the biggest initial public offerings (IPOs) and much else. Hopefully a useful video to go through to add some super examples into your revision notes.
This revision presentation considers the variety of stakeholders impacted by business activity. How will a change in objectives, such as a move from profit maximisation to revenue maximisation have an effect on different stakeholders?
This revision presentation looks at profit satisficing as an alternative objective for businesses. Why might firms satisfice? What are some of the possible consequences for economic welfare and efficiency?
There are different types and sizes of firms in the UK economy. Types include public limited companies, privately-owned firms, start-ups, state-owned businesses, social enterprises, co-operatives, and partnerships. In terms of size, micro businesses have 0-9 employees, small to medium sized businesses (SMEs) have 10-250 employees, and large businesses employ over 250 people. The document also discusses business births and deaths in the UK economy.
In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries.
Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,”
In this presentation we consider the theory of wage-setting with a monopsony employer and the possible impact that a trade union might have on wages and employment. We also look at efficiency wage theory and mutual gains from pay bargaining between stakeholders.
This document discusses various types of labour market failures including skills gaps, geographical immobility, economic inactivity, inequality, discrimination, and monopsony power. It provides examples and analysis of each failure using diagrams. Potential policy remedies are outlined for each failure, such as increasing apprenticeships, improving housing affordability, raising the minimum wage, and enhancing workers' rights. The impact of minimum wages on monopsony employers is analyzed using a diagram showing how a minimum wage can increase employment levels and wages by counteracting monopsony power.
This document discusses behavioral economics concepts and policy interventions. It summarizes key concepts like loss aversion, default choices, and herd behavior. It then examines several policies using behavioral insights, including the UK sugar levy, auto-enrollment pensions, and presumed consent for organ donation. It evaluates whether nudges can significantly impact behaviors at scale and addresses potential unintended consequences and limitations of behavioral policies.
Best practices for project execution and deliveryCLIVE MINCHIN
A select set of project management best practices to keep your project on-track, on-cost and aligned to scope. Many firms have don't have the necessary skills, diligence, methods and oversight of their projects; this leads to slippage, higher costs and longer timeframes. Often firms have a history of projects that simply failed to move the needle. These best practices will help your firm avoid these pitfalls but they require fortitude to apply.
Storytelling is an incredibly valuable tool to share data and information. To get the most impact from stories there are a number of key ingredients. These are based on science and human nature. Using these elements in a story you can deliver information impactfully, ensure action and drive change.
Understanding User Needs and Satisfying ThemAggregage
https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
How MJ Global Leads the Packaging Industry.pdfMJ Global
MJ Global's success in staying ahead of the curve in the packaging industry is a testament to its dedication to innovation, sustainability, and customer-centricity. By embracing technological advancements, leading in eco-friendly solutions, collaborating with industry leaders, and adapting to evolving consumer preferences, MJ Global continues to set new standards in the packaging sector.
How are Lilac French Bulldogs Beauty Charming the World and Capturing Hearts....Lacey Max
“After being the most listed dog breed in the United States for 31
years in a row, the Labrador Retriever has dropped to second place
in the American Kennel Club's annual survey of the country's most
popular canines. The French Bulldog is the new top dog in the
United States as of 2022. The stylish puppy has ascended the
rankings in rapid time despite having health concerns and limited
color choices.”
Zodiac Signs and Food Preferences_ What Your Sign Says About Your Tastemy Pandit
Know what your zodiac sign says about your taste in food! Explore how the 12 zodiac signs influence your culinary preferences with insights from MyPandit. Dive into astrology and flavors!
❼❷⓿❺❻❷❽❷❼❽ Dpboss Matka Result Satta Matka Guessing Satta Fix jodi Kalyan Final ank Satta Matka Dpbos Final ank Satta Matta Matka 143 Kalyan Matka Guessing Final Matka Final ank Today Matka 420 Satta Batta Satta 143 Kalyan Chart Main Bazar Chart vip Matka Guessing Dpboss 143 Guessing Kalyan night
Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
The APCO Geopolitical Radar - Q3 2024 The Global Operating Environment for Bu...APCO
The Radar reflects input from APCO’s teams located around the world. It distils a host of interconnected events and trends into insights to inform operational and strategic decisions. Issues covered in this edition include:
At Techbox Square, in Singapore, we're not just creative web designers and developers, we're the driving force behind your brand identity. Contact us today.
2. Total and Average Cost
Output
Total Fixed Total
Cost (£)
Variable
Cost (£)
0
2000
0
50
2000
500
100
2000
700
150
2000
850
200
2000
1000
250
2000
1250
300
2000
1900
350
2000
2550
400
2000
3600
Total Cost
(£)
2000
Average
Total Cost
(£)
Marginal
Cost (£)
3. Total and Average Cost
Output
Total Fixed Total
Cost (£)
Variable
Cost (£)
Total Cost
(£)
0
2000
0
2000
50
2000
500
2500
100
2000
700
2700
150
2000
850
2850
200
2000
1000
3000
250
2000
1250
3250
300
2000
1900
3900
350
2000
2550
4550
400
2000
3600
5600
Average
Total Cost
(£)
Marginal
Cost (£)
4. Total and Average Cost
Output
Total Fixed Total
Cost (£)
Variable
Cost (£)
Total Cost
(£)
Average
Total Cost
(£)
0
2000
0
2000
50
2000
500
2500
50
100
2000
700
2700
27
150
2000
850
2850
19
200
2000
1000
3000
15
250
2000
1250
3250
13
300
2000
1900
3900
13
350
2000
2550
4550
13
400
2000
3600
5600
14
Marginal
Cost (£)
5. Total and Average Cost
Output
Total Fixed Total
Cost (£)
Variable
Cost (£)
Total Cost
(£)
Average
Total Cost
(£)
0
2000
0
2000
50
2000
500
2500
50
100
2000
700
2700
27
150
2000
850
2850
19
200
2000
1000
3000
15
250
2000
1250
3250
13
300
2000
1900
3900
13
350
2000
2550
4550
13
400
2000
3600
5600
14
Look at what is
happening to
average cost
6. Total and Average Cost
Output
Total Cost
(£)
Average
Total Cost
(£)
Marginal
Cost (£)
0
2000
50
2500
50
10
100
2700
27
4
150
2850
19
3
200
3000
15
3
250
3250
13
5
300
3900
13
13
350
4550
13
13
400
5600
14
21
MARGINAL
COST
The cost of
producing one
more unit
Δ TC
ΔQ
7. Total and Average Cost
Output
Total Cost
(£)
Average
Total Cost
(£)
Marginal
Cost (£)
0
2000
50
2500
50
10
MC < AC; AC falling
100
2700
27
4
MC < AC; AC falling
150
2850
19
3
MC < AC; AC falling
200
3000
15
3
MC < AC; AC falling
250
3250
13
5
MC < AC; AC falling
300
3900
13
13
MC = AC; AC constant
350
4550
13
13
MC = AC; AC constant
400
5600
14
21
MC > AC; AC rising
8. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AC
MC < AC; AC falling
MC > AC; AC rising
MC = AC; AC constant
Output
9. Average Cost in SR when Marginal Cost is Constant
Output
Total Fixed
Cost (£)
Total
Variable
Cost (£)
Total Cost
(£)
Average
Total Cost
(£)
Marginal
Cost (£)
0
1000
0
50
1000
400
8
100
1000
800
8
150
1000
1200
8
200
1000
1600
8
250
1000
2000
8
300
1000
2400
8
350
1000
2800
8
400
1000
3200
8
10. Average Cost in SR when Marginal Cost is Constant
Output
Total Fixed
Cost (£)
Total
Variable
Cost (£)
Total Cost
(£)
Average
Total Cost
(£)
Marginal
Cost (£)
0
1000
0
1000
50
1000
400
1400
8
100
1000
800
1800
8
150
1000
1200
2200
8
200
1000
1600
2600
8
250
1000
2000
3000
8
300
1000
2400
3400
8
350
1000
2800
3800
8
400
1000
3200
4200
8
11. Average Cost when Marginal Cost is Constant
Output
Total Fixed
Cost (£)
Total
Variable
Cost (£)
Total Cost
(£)
Average
Total Cost
(£)
Marginal
Cost (£)
∆TC/∆Q
0
1000
0
1000
50
1000
400
1400
28
8
100
1000
800
1800
18
8
150
1000
1200
2200
14.70
8
200
1000
1600
2600
13
8
250
1000
2000
3000
12
8
300
1000
2400
3400
11.33
8
350
1000
2800
3800
10.85
8
400
1000
3200
4200
10.50
8
12. Average Cost when Marginal Cost is Constant
Output
Average
Total Cost
(£)
Marginal
Cost (£)
50
28
8
100
18
8
150
14.70
8
200
13
8
250
12
8
300
11.33
8
350
10.85
8
400
10.50
8
0
13. Average Cost when Marginal Cost is Constant
Output
Average
Total Cost
(£)
Marginal
Cost (£)
50
28
8
100
18
8
150
14.70
8
200
13
8
250
12
8
300
11.33
8
350
10.85
8
400
10.50
8
Cost
0
AC
£8
MC
Output (Q)
If MC is constant at £8 per extra
unit, then AC will decline towards
MC as output expands
14. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AC
AC will fall
when
MC < AC
Output
15. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AC
AC will fall
when
MC < AC
Average cost is at a
minimum when it is
intersected by the
MC curve
Output
16. Average Cost, and Marginal Cost in the Short Run
Cost
AC will rise
when
MC > AC
MC
AC
AC will fall
when
MC < AC
Average cost is at a
minimum when it is
intersected by the
MC curve
Output
17. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AC
AVC
MC also cuts AVC
curve at min of AVC
Output
18. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AC
AVC
AFC
Output
19. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AFC will fall as
the level of
output
expands
AC
AVC
AFC
Output
20. Average Cost, and Marginal Cost in the Short Run
Cost
MC
AFC will fall as
the level of
output
expands
AC
AVC
AFC
AFC
Cost
AFC
Output
Output