Short-Run Cost Measures
|
|
|
- Primrose Turner
- 6 years ago
- Views:
Transcription
1 Chapter 7 Costs
2 Short-Run Cost Measures Fixed cost (F) - a production expense that does not vary with output. Variable cost (VC) - a production expense that changes with the quantity of output produced. Cost (total cost, C) - the sum of a firm s variable cost and fixed cost: C = VC + F 7-9 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
3 Marginal Cost Marginal cost (MC) - the amount by which a firm s cost changes if the firm produces one more unit of output. And since only variable costs change with output: 7-10 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
4 Average Costs Average fixed cost (AFC) - the fixed cost divided by the units of output produced: AFC = F/q. Average variable cost (AVC) - the variable cost divided by the units of output produced: AVC = VC/q. Average cost (AC) - the total cost divided by the units of output produced: AC = C/q AC = AFC + AVC Copyright 2012 Pearson Addison-Wesley. All rights reserved.
5 Table 7.1 Variation of Short-Run Cost with Output 7-12 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
6 Cost per unit, $ Cost, $ Figure 7.1 Short- Run Cost Curves (a) 400 C VC B A F Quantity, q, Units per day (b) 60 MC b a AC AVC 8 AFC Quantity, q, Units per day 7-13 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
7 Cost per unit, $ Relationship Between Average and Marginal Cost Curves When MC is lower than AC, When ACMC is is lower decreasing than AVC, AVC is decreasing b and when MC is and larger when than MC AC, is larger AC is than increases AVC, AVC is increases a MC AC AVC so MC = AC, at the lowest point of the AC curve! so MC = AVC, at the lowest point of the AVC curve! Quantity, q, Units per day 7-14 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
8 Shape of the Marginal Cost Curve MC = DVC/Dq. But in the short run, DVC = wdl (can you tell why?) Therefore, MC = wdl/dq The additional output created by every additional unit of labor is: Dq/ DL = MP L Therefore, MC = w/ MP L 7-16 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
9 Shape of the Marginal Cost Curve (cont.) 7-17 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
10 Shape of the Average Cost Curves AVC = VC/q. But in the short-run, with only labor as an input: AVC = VC/q = wl/q And since q/l = AP L, then AVC = VC/q = w/ap L 7-18 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
11 Shape of the Average Cost Curves (cont.) 7-19 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
12 Application: Short-Run Cost Curves for a Furniture Manufacturer 7-20 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
13 Long-Run Costs Fixed costs are avoidable in the long run. In the long F = 0. As a result, the long-run total cost equals: C = VC Now, only concerned with three costs: 1. Total cost (C) 2. Average cost (AC) 3. Marginal cost (MC) 7-26 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
14 Input Choice Isocost line - all the combinations of inputs that require the same (iso-) total expenditure (cost). The firm s total cost equation is: C = wl + rk. Labor Costs Capital Costs 7-27 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
15 7-28 Copyright 2012 Pearson Addison-Wesley. All rights reserved. Input Choice (cont.) The firm s total cost equation is: C = wl + rk. We get the Isocost equation by setting fixing the costs at a particular level: C = wl + rk. And then solving for K (variable along y- axis): K = C r - w r L
16 Table 7.3 Bundles of Labor and Capital That Cost the Firm $ Copyright 2012 Pearson Addison-Wesley. All rights reserved.
17 Figure 7.4 A Family of Isocost Lines K, Units of capital per year 10 = $100 $ e For each extra unit of capital it uses, the firm must use two fewer units of labor to hold its cost constant. d Isocost Equation C K = - w L r r Initial Values C = $100 w = $5 r = $ DK = 2.5 c DL = 5 Slope = -1/2 = w/r b $100 isocost a $100 $5 = 20 L, Units of labor per year 7-30 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
18 Figure 7.4 A Family of Isocost Lines K, Units of capital per year 15 = 10 = $150 $10 $100 $10 e Isocost Equation C K = - w L r r An increase in C. Initial Values C = $150 w = $5 r = $10 $100 isocost $150 isocost a $100 $5 = 20 $150 $5 = 30 L, Units of labor per year 7-31 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
19 Figure 7.4 A Family of Isocost Lines K, Units of capital per year 15 = 10 = $150 $10 $100 $10 e A decrease in C. Isocost Equation C K = - w L r r Initial Values C = $50 w = $5 r = $10 5 = $50 $10 $50 isocost $100 isocost $150 isocost $50 $5 = 10 a $100 $5 = 20 $150 $5 = 30 L, Units of labor per year 7-32 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
20 Properties of Isocost Lines 1. Further from the origin = higher cost. 2. All isocost lines have the same negative slope = -w/r. 3. X-axis and y-axis intercepts are meaningful. Tell how much Labor and Capital can be purchased if the firm spends all money on only that input. 4. Similar to budget constraints, but with one main difference Copyright 2012 Pearson Addison-Wesley. All rights reserved.
21 Combining Cost and Production Information The firm can choose any of three equivalent approaches to minimize its cost: Lowest-isocost rule - pick the bundle of inputs where the lowest isocost line touches the isoquant. Tangency rule - pick the bundle of inputs where the isoquant is tangent to the isocost line. Last-dollar rule - pick the bundle of inputs where the last dollar spent on one input gives as much extra output as the last dollar spent on any other input Copyright 2012 Pearson Addison-Wesley. All rights reserved.
22 Figure 7.5 Cost Minimization K, Units of capital per hour 100 $3,000 isocost $2,000 isocost $1,000 isocost q = 100 isoquant Which of these three Isocost would allow the firm to produce the 100 units of output at the lowest possible cost? x Isocost Equation C K = - w L r r Isoquant Slope MP L - = MRTS MP K 0 50 L, Units of labor per hour Initial Values q = 100 C = $2,000 w = $24 r = $ Copyright 2012 Pearson Addison-Wesley. All rights reserved.
23 Figure 7.5 Cost Minimization K, Units of capital per hour 303 $3,000 isocost $2,000 isocost q = 100 isoquant y Isocost Equation C K = - w L r r Isoquant Slope MP L - = MRTS MP K $1,000 isocost x z Initial Values q = 100 C = $2,000 w = $24 r = $ L, Units of labor per hour 7-36 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
24 Cost Minimization At the point of tangency, the slope of the isoquant equals the slope of the isocost. Therefore, MRTS MRTS MP MP MP w L K L w r MP MP w r MP r K L K last-dollar rule: cost is minimized if inputs are chosen so that the last dollar spent on labor adds as much extra output as the last dollar spent on capital Copyright 2012 Pearson Addison-Wesley. All rights reserved.
25 Figure 7.6 Change in Factor Price K, Units of capital per hour Original isocost, $2,000 New isocost, $1,032 q = 100 isoquant A decrease in w. x v Minimizing Cost Rule MP L MP w = K r Initial Values q = 100 C = $2,000 w = $24 r = $8 w 2 = $8 C 2 = $1, L, Workers per hour 7-40 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
26 How Long-Run Cost Varies with Output Expansion path - the cost-minimizing combination of labor and capital for each output level 7-43 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
27 K, Units of capital per hour Figure 7.7(a) Expansion Path and Long-Run Cost Curve $4,000 isocost $3,000 isocost $2,000 isocost Expansion path x y z q = 200 Isoquant q = 150 Isoquant q = 100 Isoquant L, Workers per hour 7-44 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
28 Figure 7.7(b) Expansion Path and Long-Run Cost Curve 7-45 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
29 The Shape of Long Run Cost Curves The shape of long run cost curves is determined by the production function relationship between output and inputs Copyright 2012 Pearson Addison-Wesley. All rights reserved.
30 Figure 7.8 Long- Run Cost Curves Discussion Points: The long-run cost curve C rises less rapidly below q* and more rapidly after q*. Marginals pull averages. Same as before. Intersection of MC and AC at minimum AC. Same as before. But, why is the AC curve still U-shaped even though fixed costs=0? 7-48 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
31 Economies of Scale Economies of scale - property of a cost function whereby the average cost of production falls as output expands (IRS, falling AC). Diseconomies of scale - property of a cost function whereby the average cost of production rises when output increases (DRS, rising AC) Copyright 2012 Pearson Addison-Wesley. All rights reserved.
32 Table 7.4 Returns to Scale and Long-Run Costs 7-50 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
33 Table 7.5 Shape of Average Cost Curves in Canadian Manufacturing 7-51 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
34 Lower Costs in the Long Run In its long-run planning, a firm chooses a plant size and makes other investments so as to minimize its long-run cost on the basis of how many units it produces. Once it chooses its plant size and equipment, these inputs are fixed in the short run. Thus, the firm s long-run decision determines its short-run cost Copyright 2012 Pearson Addison-Wesley. All rights reserved.
35 Average cost, $ Figure 7.9 Long-Run Average Cost as the Envelope of Short-Run Average Cost Curves SRAC 3 LRAC SRAC 1 SRAC 3 SRAC a b c d e 0 q 1 q 2 q, Output per day 7-53 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
36 Application: Long-Run Cost Curves in Furniture Manufacturing and Oil Pipelines 7-55 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
37 Figure 7.10 Long-Run and Short-Run Expansion Paths 7-57 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
38 How Learning by Doing Lowers Costs Learning by doing - the productive skills and knowledge that workers and managers gain from experience 7-58 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
39 Why Costs Fall over Time 1. Technological or organizational progress may increase productivity. 2. Operating at a larger scale in the long run may lower average costs due to increasing returns to scale. 3. The firm s workers and managers may become more proficient over time due to learning by doing Copyright 2012 Pearson Addison-Wesley. All rights reserved.
40 Cost of Producing Multiple Goods Economies of scope - situation in which it is less expensive to produce goods jointly than separately. Production possibility frontier - the maximum amount of outputs that can be produced from a fixed amount of input Copyright 2012 Pearson Addison-Wesley. All rights reserved.
41 Figure 7.12 Joint Production 7-62 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
42 Figure 7.13 Technology Choice 7-63 Copyright 2012 Pearson Addison-Wesley. All rights reserved.
Chapter Seven. Costs
Chapter Seven Costs Topics Measuring Costs. Short-Run Costs. Long-Run Costs. Lower Costs in the Long Run. Cost of Producing Multiple Goods. 2009 Pearson Addison-Wesley. All rights reserved. 7-2 Economic
Chapter Seven. Topics. Economic Cost. Measuring Costs. Short-Run Costs. Long-Run Costs. Lower Costs in the Long Run. Cost of Producing Multiple Goods.
Chapter Seven Costs Topics Measuring Costs. Short-Run Costs. Long-Run Costs. Lower Costs in the Long Run. Cost of Producing Multiple Goods. 2009 Pearson Addison-Wesley. All rights reserved. 7-2 Economic
Lecture 28.April 2008 Microeconomics Esther Kalkbrenner:
Lecture 28.April 2008 Microeconomics Esther Kalkbrenner: Supply and Demand Familiar Concepts Supply and Demand (Chapter 2) Applying the Supply and Demand Model (Chapter 3) Consumers Choice Consumer Choice
Chapter 7. Costs. An economist is a person who, when invited to give a talk at a banquet, tells the audience there s no such thing as a free lunch.
Chapter 7 Costs An economist is a person who, when invited to give a talk at a banquet, tells the audience there s no such thing as a free lunch. Chapter 7 Outline 7.1 Measuring Costs 7.2 Short-Run Costs
Cost curves: ch moving from production to cost - look at costs of various input bundles - translate this to cost of output (in SR and LR)
Cost curves: ch 10 - moving from production to cost - look at costs of various input bundles - translate this to cost of output (in SR and LR) econ 203, costs 1 Why do we care about properties of prod'n
Econ 110: Introduction to Economic Theory. 10th Class 2/11/11
Econ 110: Introduction to Economic Theory 10th Class 2/11/11 go over practice problems second of three lectures on producer theory Last time we showed the first type of constraint operating on the firm:
Costs. Lecture 5. August Reading: Perlo Chapter 7 1 / 63
Costs Lecture 5 Reading: Perlo Chapter 7 August 2015 1 / 63 Introduction Last lecture, we discussed how rms turn inputs into outputs. But exactly how much will a rm wish to produce? 2 / 63 Introduction
Economic cost. Full accounting of cost to society. There are counterfactual, competing allocations that underlie this concept.
McPeak Lecture 7 PAI 897 Costs. We are leaving selling price / revenue out of the picture for the moment, but we are adding in the issue of input costs. Economic cost. Full accounting of cost to society.
Chapter 7. The Cost of Production. Fixed and Variable Costs. Fixed Cost Versus Sunk Cost
Chapter 7 The Cost of Production Fixed and Variable Costs Total output is a function of variable inputs and fixed inputs. Therefore, the total cost of production equals the fixed cost (the cost of the
Production. Economics II: Microeconomics. November Aslanyan (VŠE Praha) Production 11/09 1 / 25
Production Economics II: Microeconomics VŠE Praha November 2009 Aslanyan (VŠE Praha) Production 11/09 1 / 25 Microeconomics Consumers: Firms: People. Households. Internal Organisation. Industrial Organisation.
EC Intermediate Microeconomic Theory
EC 311 - Intermediate Microeconomic Theory Lecture: Cost of Production Cont. Bekah Selby rebekahs@uoregon.edu May 5, 2014 Selby EC 311 - Lectures May 5, 2014 1 / 23 Review A firm faces several types of
Economic cost. Includes both the explicit and the implicit cost. Full accounting of cost to society.
McPeak Lecture 8 PAI 723 Costs. We are leaving selling price / revenue out of the picture for the moment, but we are adding in the issue of input costs. Economic cost. Includes both the explicit and the
The Production Process and Costs. By Asst. Prof. Kessara Thanyalakpark, Ph.D.
The Production Process and Costs By Asst. Prof. Kessara Thanyalakpark, Ph.D. 1 Production Analysis Production Function Q = F(K,L) The maximum amount of output that can be produced with K units of capital
PRODUCTION COSTS. Econ 311 Microeconomics 1 Lecture Material Prepared by Dr. Emmanuel Codjoe
PRODUCTION COSTS In this section we introduce production costs into the analysis of the firm. So far, our emphasis has been on the production process without any consideration of costs. However, production
EconS Firm Optimization
EconS 305 - Firm Optimization Eric Dunaway Washington State University eric.dunaway@wsu.edu October 9, 2015 Eric Dunaway (WSU) EconS 305 - Lecture 18 October 9, 2015 1 / 40 Introduction Over the past two
Managerial Economics & Business Strategy Chapter 5. The Production Process and Costs
Managerial Economics & Business Strategy Chapter 5 The Production Process and Costs I. Production Analysis Overview Total Product, Marginal Product, Average Product Isoquants Isocosts Cost Minimization
Managerial Economics & Business Strategy Chapter 5. The Production Process and Costs
Managerial Economics & Business Strategy Chapter 5 The Production Process and Costs I. Production Analysis Overview Total Product, Marginal Product, Average Product Isoquants Isocosts Cost Minimization
Fixed, Variable & Total Cost Functions
Cost Curves Fixed, Variable & Total Cost Functions F is the total cost to a firm of its shortrun fixed inputs. F, the firm s fixed cost, does not vary with the firm s output level. c v () is the total
Chapter 7. The Cost of Production. ΔVC Δq. ΔTC Δq. Fixed and Variable Costs. Fixed Cost Versus Sunk Cost. Measuring Costs
Chapter 7 The Cost of Production Fixed and Variable Costs Total output is a function of variable inputs and fixed inputs. Therefore, the total cost of production equals the fixed cost (the cost of the
Costs. An economist is a person who, when invited to give a talk at a banquet, tells audience there s no such thing as a free lunch.
7 the Costs An economist is a person who, when invited to give a talk at a banquet, tells audience there s no such thing as a free lunch. CHALLENGE Technology Choice at Home Versus Abroad Amanager of a
7. The Cost of Production
7. The Cost of Production Literature: Pindyck and Rubinfeld, Chapter 7 Varian, Chapters 20, 21 Frambach, Chapter 3.3 30.05.2017 Prof. Dr. Kerstin Schneider Chair of Public Economics and Business Taxation
Chapter 5 The Production Process and Costs
Managerial Economics & Business Strategy Chapter 5 The Production Process and Costs McGraw-Hill/Irwin Copyright 2010 by the McGraw-Hill Companies, Inc. All rights reserved. I. Production Analysis Overview
INTERMEDIATE MICROECONOMICS LECTURE 9 THE COSTS OF PRODUCTION
9-1 INTERMEDIATE MICROECONOMICS LECTURE 9 THE COSTS OF PRODUCTION The opportunity cost of an asset (or, more generally, of a choice) is the highest valued opportunity that must be passed up to allow current
This appendix discusses two extensions of the cost concepts developed in Chapter 10.
CHAPTER 10 APPENDIX MATHEMATICAL EXTENSIONS OF THE THEORY OF COSTS This appendix discusses two extensions of the cost concepts developed in Chapter 10. The Relationship Between Long-Run and Short-Run Cost
Measuring Cost: Which Costs Matter? (pp )
Measuring Cost: Which Costs Matter? (pp. 213-9) Some costs vary with output, while some remain the same no matter the amount of output Total cost can be divided into: 1. Fixed Cost (FC) Does not vary with
Production costs. Microéconomie, chapter 7. Solvay Business School Université Libre de Bruxelles
Production costs Microéconomie, chapter 7 1 Points to be addressed What costs to take into account? Short run costs Long run costs Short and long run cost curves Returns to scale and economies of scale
These notes essentially correspond to chapter 7 of the text.
These notes essentially correspond to chapter 7 of the text. 1 Costs When discussing rms our ultimate goal is to determine how much pro t the rm makes. In the chapter 6 notes we discussed production functions,
THEORY OF COST. Cost: The sacrifice incurred whenever an exchange or transformation of resources takes place.
THEORY OF COST Glossary of New Terms Cost: The sacrifice incurred whenever an exchange or transformation of resources takes place. Sunk Cost: A cost incurred regardless of the alternative action chosen
Math: Deriving supply and demand curves
Chapter 0 Math: Deriving supply and demand curves At a basic level, individual supply and demand curves come from individual optimization: if at price p an individual or firm is willing to buy or sell
Theory of Cost. General Economics
Theory of Cost General Economics Cost Analysis Cost Analysis refers to the Study of Behaviour of Cost in relation to one or more Production Criteria like size of Output, Scale of Operations, Prices of
Lecture 8: Producer Behavior
Lecture 8: Producer Behavior October 23, 2018 Overview Course Administration Basics of Production Production in the Short Run Production in the Long Run The Firm s Problem: Cost Minimization Returns to
NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Midterm II November 9, 2006
NAME: INTERMEDIATE MICROECONOMIC THEORY FALL 2006 ECONOMICS 300/012 Section I: Multiple Choice (4 points each) Identify the choice that best completes the statement or answers the question. 1. The marginal
c U 2 U 1 Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods
Econ 310 Practice Questions: Chaps. 4, 7-8 Figure 4.1 Other goods A H a c U 2 b U 1 0 x Z H Z 1. Figure 4.1 shows the effect of a decrease in the price of good x. The substitution effect is indicated by
Microeconomics. Lecture Outline. Claudia Vogel. Winter Term 2009/2010. Part II Producers, Consumers, and Competitive Markets
Microeconomics Claudia Vogel EUV Winter Term 2009/2010 Claudia Vogel (EUV) Microeconomics Winter Term 2009/2010 1 / 36 Lecture Outline Part II Producers, Consumers, and Competitive Markets 7 Measuring
Unit 3: Production and Cost
Unit 3: Production and Cost Name: Date: / / Production Function The production function of a firm is a relationship between inputs used and output produced by the firm. For various quantities of inputs
EconS Cost Functions
EconS 305 - Cost Functions Eric Dunaway Washington State University eric.dunaway@wsu.edu October 7, 2015 Eric Dunaway (WSU) EconS 305 - Lecture 17 October 7, 2015 1 / 41 Introduction When we previously
1. The table below shows the short-run production function for Albert s Pretzels. The marginal productivity of labor
Econ301 (summer 2007) Quiz 1 Date: Jul 5 07 Instructor: Helen Yang PART I: Multiple Choice (5 points each, 60 points in total) 1. The table below shows the short-run production function for Albert s Pretzels.
Types of Cost Curves. Chapter Twenty-One. Types of Cost Curves. Types of Cost Curves. Fixed, Variable & Total Cost Functions
Tpes of Cost Chapter Twent-One Cost A total cost curve is the graph of a firm s total cost function. A variable cost curve is the graph of a firm s variable cost function. An average total cost curve is
Chapter-17. Theory of Production
Chapter-17 Theory of Production After reading this lesson, you would be able to: 1. Define production function, isoquants, marginal product, price discrimination, monopsonist and the all-or-nothing demand
Demand Side: Community Indifference Curve (CIC) Shows various combinations of two goods with equivalent welfare
Basic Tools for General Equilibrium Analysis Demand Side: Community Indifference Curve (CIC) Shows various combinations of two goods with equivalent welfare Good Y Downward sloping And Convexity CI Since
Behind the Supply Curve: Inputs and Costs
chapter: 12 >> Behind the Supply Curve: Inputs and Costs The following materials are taken from Chap. 12 of Economics, 2 nd ed., Krugman and Wells(2009), Worth Palgrave MaCmillan. 2009 Worth Publishers
ECON 101 SECOND MIDTERM REVIEW SESSION BY LINH VO
ECON 101 SECOND MIDTERM REVIEW SESSION BY LINH VO 1 Assume nothing, worship no one, applaud humility II. III. IV. TABLE OF CONTENT I. Who is Linh? Chapter 6 Consumer Behaviour Chapter 7 - Producer in Short
LECTURE NOTES ON MICROECONOMICS
LECTURE NOTES ON MICROECONOMICS ANALYZING MARKETS WITH BASIC CALCULUS William M. Boal Part 3: Firms and competition Chapter 10: Cost Problems (10.1) [Minimizing cost] Suppose a firm wishes to produce 30
File: ch08, Chapter 8: Cost Curves. Multiple Choice
File: ch08, Chapter 8: Cost Curves Multiple Choice 1. The long-run total cost curve shows a) the various combinations of capital and labor that will produce different levels of output at the same cost.
Summer 2016 ECN 303 Problem Set #1
Summer 2016 ECN 303 Problem Set #1 Due at the beginning of class on Monday, May 23. Give complete answers and show your work. The assignment will be graded on a credit/no credit basis. In order to receive
COST THEORY AND ESTIMATION
BEC 30325: MANAGERIAL ECONOMICS Session 07 COST THEORY AND ESTIMATION Dr. Sumudu Perera Session Session Outline Outline The Nature of Costs Explicit Costs Implicit Costs Short-Run Cost Functions Long-Run
Chapter 6. Production. Introduction. Production Decisions of a Firm. Production Decisions of a Firm
Chapter 6 Production Introduction Our study of consumer behavior was broken down into 3 steps Describing consumer preferences Consumers face budget constraints Consumers choose to maximize utility Production
Long Run Total Cost. Example 10/14/2014
Chapter 8, Lecture slides Long Run Total Cost The long run total cost curve shows the total cost of a firm s optimal choice combinations for labor and capital as the firm s total output increases. Note
ECON 221: PRACTICE EXAM 2
ECON 221: PRACTICE EXAM 2 Answer all of the following questions. Use the following information to answer the questions below. Labor Q TC TVC AC AVC MC 0 0 100 0 -- -- 1 10 110 10 11 1 2 25 120 20 4.8.8
A PRODUCER OPTIMUM. Lecture 7 Producer Behavior
Lecture 7 Producer Behavior A PRODUCER OPTIMUM The Digital Economist A producer optimum represents a solution to a problem facing all business firms -- maximizing the profits from the production and sales
STUDY GUIDE CHAPTER 3: PRODUCTION AND COSTS
EC/MBA 722 - FALL 2002 STUDY GUIDE CHAPTER 3: PRODUCTION AND COSTS WHAT YOU SHOULD KNOW IN THIS CHAPTER (1) The concept of production function, short run and long run, isoquant, marginal products, returns
Model Question Paper Economics - I (MSF1A3)
Model Question Paper Economics - I (MSF1A3) Answer all 7 questions. Marks are indicated against each question. 1. Which of the following statements is/are not correct? I. The rationality on the part of
Firm s demand for the input. Supply of the input = price of the input.
Chapter 8 Costs Functions The economic cost of an input is the minimum payment required to keep the input in its present employment. It is the payment the input would receive in its best alternative employment.
ECON 311 Winter Quarter, 2010 NAME: KEY Prof. Hamilton
ECON 311 Winter Quarter, 2010 NAME: KEY Prof. Hamilton FINAL EXAM 200 points 1. (30 points). A firm produces rubber gaskets using labor, L, and capital, K, according to a production function Q = f(l,k).
The objectives of the producer
The objectives of the producer Laurent Simula October 19, 2017 Dr Laurent Simula (Institute) The objectives of the producer October 19, 2017 1 / 47 1 MINIMIZING COSTS Long-Run Cost Minimization Graphical
ECON 100A Practice Midterm II
ECON 100A Practice Midterm II PART I 10 T/F Mark whether the following statements are true or false. No explanation needed. 1. In a competitive market, each firm faces a perfectly inelastic demand for
Test 2 Economics 321 Chappell October, Last 4 digits SSN
Test 2 Economics 32 Chappell October, 2007 Name Last 4 digits SSN Answer multiple choice questions on the form provided. Be sure to write your name and last 4 digits of your social security number on that
Problem Set 5 Answers. A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs:
1. Ch 7, Problem 7.2 Problem Set 5 Answers A grocery shop is owned by Mr. Moore and has the following statement of revenues and costs: Revenues $250,000 Supplies $25,000 Electricity $6,000 Employee salaries
Recall the conditions for a perfectly competitive market. Firms are price takers in both input and output markets.
McPeak Lecture 9 PAI 723 Competitive firms and markets. Recall the conditions for a perfectly competitive market. 1) The good is homogenous 2) Large numbers of buyers and sellers/ freedom of entry and
Practice Questions Chapters 9 to 11
Practice Questions Chapters 9 to 11 Producer Theory ECON 203 Kevin Hasker These questions are to help you prepare for the exams only. Do not turn them in. Note that not all questions can be completely
MICROECONOMICS - CLUTCH CH THE COSTS OF PRODUCTION.
!! www.clutchprep.com CONCEPT: REVENUE, COST, AND PROFIT Our focus moves from the economy as a whole to just one firm. Revenue is the amount of money received from sales calculated as: Revenues are the
FARM MANAGEMENT Lecture.5 Costs, Returns and Profits on the Output Side
FARM MANAGEMENT Lecture.5 Costs, Returns and Profits on the Output Side By Dr. Mahmoud Arafa Lecturer of Agricultural Economic, Cairo Un. Contacts: E-Mail: mahmoud.arafa@agr.cu.edu.eg W.S: http://scholar.cu.edu.eg/mahmoudarafa
Production Theory. Lesson 7. Ryan Safner 1. Hood College. ECON Microeconomic Analysis Fall 2016
Production Theory Lesson 7 Ryan Safner 1 1 Department of Economics Hood College ECON 306 - Microeconomic Analysis Fall 2016 Ryan Safner (Hood College) ECON 306 - Lesson 7 Fall 2016 1 / 64 Lesson Plan 1
The Costs of Production
The Costs of Production The Costs of Production The Law of Supply: Firms are willing to produce and sell a greater quantity of a good when the price of the good is high. This results in a supply curve
Review of General Economic Principles. Review Notes from AGB 212
Review of General Economic Principles Review Notes from AGB 212 1 Agenda Production Theory One input, one output Production Theory Two inputs, one output Production Theory One input, two outputs 2 The
False_ The average revenue of a firm can be increasing in the firm s output.
LECTURE 12: SPECIAL COST FUNCTIONS AND PROFIT MAXIMIZATION ANSWERS AND SOLUTIONS True/False Questions False_ If the isoquants of a production function exhibit diminishing MRTS, then the input choice that
a. Graph the demand for calculators below. Label your axes and intercepts. (4 points)
Econ 3144 Spring 2012 Name Test 2 Dr. Rupp I have neither given nor received aid on this exam (signature) The following formula might be useful: E p = (P/Q)*(1/slope) I. Discussion Questions (12.5 points
The Theory of the Firm
The Theory of the Firm I. Introduction: A Schematic Comparison of the Neoclassical Approaches to the Studies Between the Theories of the Consumer and the Firm A. The Theory of Consumer Choice: Consumer
The Costs of Production
C H A P T E R The Costs of Production Economics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Vance Ginn & Ron Cronovich 2009 South-Western, a part of Cengage Learning, all rights
13 The Costs of Production
Seventh Edition Principles of Economics N. Gregory Mankiw Wojciech Gerson (1831-1901) CHAPTER 13 The Costs of Production ACTIVE LEARNING 1 Brainstorming costs You run Ford Motor Company. List three different
not to be republished NCERT Chapter 3 Production and Costs 3.1 PRODUCTION FUNCTION
Chapter 3 A Firm Effort In the previous chapter, we have discussed the behaviour of the consumers. In this chapter as well as in the next, we shall examine the behaviour of a producer. A producer or a
DEMAND AND SUPPLY ANALYSIS: THE FIRM
DEMAND AND SUPPLY ANALYSIS: THE FIRM 1 2. OBJECTIVES OF THE FIRM Profit = Total revenue Total cost Total Revenue: Amount received by a firm from sale of its output. Total Cost: Market value of the inputs
1. What is the vertical intercept of the demand curve above? a. 120 b. 5 c. 24 d. 60 e. 1/5
Econ 3144 Fall 010 Name Test Dr. Rupp I have neither given nor received aid on this exam (signature) The following formula might be useful: E p = (P/Q)*(1/slope) 40 Multiple Choice Questions Use the following
FEEDBACK TUTORIAL LETTER. 1st SEMESTER 2018 ASSIGNMENT 2 INTERMEDIATE MICRO ECONOMICS IMI611S
FEEDBACK TUTORIAL LETTER 1st SEMESTER 2018 ASSIGNMENT 2 INTERMEDIATE MICRO ECONOMICS IMI611S 1 Course Name: Course Code: Department: INTERMEDIATE MICROECONOMICS IMI611S ACCOUNTING, ECONOMICS AND FINANCE
Ecn Intermediate Microeconomic Theory University of California - Davis November 13, 2008 Professor John Parman. Midterm 2
Ecn 100 - Intermediate Microeconomic Theory University of California - Davis November 13, 2008 Professor John Parman Midterm 2 You have until 6pm to complete the exam, be certain to use your time wisely.
Economics 101 Spring 2000 Section 4 - Hallam Final Exam Version E - Blue
Economics 101 Spring 2000 Section 4 - Hallam Final Exam Version E - Blue 1. Marginal revenue measures a. the change in cost required to produce one more unit of output. b. the change in output that can
CHAPTER 6 COST OF PRODUCTION
CHAPTER 6 COST OF PRODUCTION Chapter Outline I. Types of Costs II. Costs in the Long Run III. Costs in the Short Run IV. Relationship of Short-Run Cost Curves to Short-Run Product Curves V. Relation of
Dr. Barry Haworth University of Louisville Department of Economics Economics 201. Midterm #2
Dr. Barry Haworth University of Louisville Department of Economics Economics 201 Midterm #2 Part 1. Multiple Choice Questions (2 points each question) 1. One advantage of forming a corporation is: a. unlike
Competitive Firms in the Long-Run
Competitive Firms in the Long-Run EC 311 - Selby May 18, 2014 EC 311 - Selby Competitive Firms in the Long-Run May 18, 2014 1 / 20 Recap So far we have been discussing the short-run for competitive firms
Economics 101 Fall 1998 Section 3 - Hallam Exam 3. Iowa Kansas
Economics 101 Fall 1998 Section 3 - Hallam Exam 3 Iowa and Kansas can both produce corn and wheat. The following table represents yield per acre for the two states. Corn is measured in bushels (56 pounds
Eliminating Substitution Bias. One eliminate substitution bias by continuously updating the market basket of goods purchased.
Eliminating Substitution Bias One eliminate substitution bias by continuously updating the market basket of goods purchased. 1 Two-Good Model Consider a two-good model. For good i, the price is p i, and
b. If price is between the minimum of AVC and AC, then the firm will shutdown.
EEP1/ECON 3 November 4 2008 Professor Peter Berck SOLUTIONS (Quiz 2 Fall 2008) The exam totals to 20 points. Do all the questions. 1. True, False, Uncertain and Why. 1 point each. a. Technology standards
Economics 101 Spring 2000 Section 4 - Hallam Exam 4A - Blue
Economics 101 Spring 2000 Section 4 - Hallam Exam 4A - Blue 1. Marginal revenue measures a. the change in cost required to produce one more unit of output. a. the change in output that can be obtained
Homework #4 Microeconomics (I), Fall 2010 Due day:
組別 姓名與學號 Homework #4 Microeconomics (I), Fall 2010 Due day: Part I. Multiple Choices: 60% (5% each) Please fill your answers in below blanks, only one answer for each question. 1 2 3 4 5 6 7 8 9 10 11
Marginal Revenue, Marginal Cost, and Profit Maximization pp
Marginal Revenue, Marginal Cost, and Profit Maximization pp. 262-8 We can study profit maximizing output for any firm, whether perfectly competitive or not Profit (π) = Total Revenue - Total Cost If q
Firm s Problem. Simon Board. This Version: September 20, 2009 First Version: December, 2009.
Firm s Problem This Version: September 20, 2009 First Version: December, 2009. In these notes we address the firm s problem. questions. We can break the firm s problem into three 1. Which combinations
Economics I Lecture: Anna Della Valle TA Andrea Venegoni. Tutorial 4 Production theory, theory of the firm
Economics I Lecture: Anna Della Valle TA Andrea Venegoni Tutorial 4 Production theory, theory of the firm PROBLEM 1 Consider the following investment financed with equity and debt. Calculate the expected
Business 33001: Microeconomics
Business 33001: Microeconomics Owen Zidar University of Chicago Booth School of Business Week 4 Owen Zidar (Chicago Booth) Microeconomics Week 4: Cost and Technology 1 / 93 Exam Logistics In-class exam
Chapter 4 Specific Factors and Income Distribution
Chapter 4 Specific Factors and Income Distribution Introduction If trade is so good for the economy, why is there such opposition? Two main reasons why international trade has strong effects on the distribution
Economics 101 Section 5
Economics 101 Section 5 Lecture #13 February 26, 2004 Production costs in the short run Outline Explain some of HW#5 Recap from last lecture Short-run vs long-run production Fixed inputs Variable inputs
PART III: PRODUCTION THEORY. J. Alberto Molina J. I. Giménez Nadal
PART III: PRODUCTION THEORY J. Alberto Molina J. I. Giménez Nadal MICROECONOMICS I Part I: Introduction Unit 1: Concept and scope of Economics Unit 2: Demand, supply and market Part II: Demand theory Unit
Cost Curves. Molly W. Dahl Georgetown University Econ 101 Spring 2009
Cost Curves Moll W. Dahl Georgetown Universit Econ 101 Spring 2009 1 Tpes of Cost Curves Total Cost Curve: graph of a firm s total cost function. Variable Cost Curve: graph of a firm s variable cost function.
Cost Functions. PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University
Cost Functions PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 Definitions of Costs It is important to differentiate between accounting cost and economic cost Accountants:
EconS Constrained Consumer Choice
EconS 305 - Constrained Consumer Choice Eric Dunaway Washington State University eric.dunaway@wsu.edu September 21, 2015 Eric Dunaway (WSU) EconS 305 - Lecture 12 September 21, 2015 1 / 49 Introduction
Intermediate microeconomics. Lecture 3: Production theory. Varian, chapters 19-24
Intermediate microeconomics Lecture 3: Production theory. Varian, chapters 19-24 Part 1: Profit maximization 1. Technology a) Production quantity and production function b) Marginal product and technical
Microeconomics Pre-sessional September 2016
Microeconomics Pre-sessional September 2016 So7ris Georganas Economics Department City University ondon Organisa7on of the Microeconomics Pre-sessional Introduc7on 10:00-10:30 Demand and Supply 10:30-11:10
Midterm 2 - Solutions
Ecn 00 - Intermediate Microeconomic Theory University of California - Davis February 7, 009 Instructor: John Parman Midterm - Solutions You have until 3pm to complete the exam, be certain to use your time
Lecture 11. The firm s problem. Randall Romero Aguilar, PhD II Semestre 2017 Last updated: October 16, 2017
Lecture 11 The firm s problem Randall Romero Aguilar, PhD II Semestre 2017 Last updated: October 16, 2017 Universidad de Costa Rica EC3201 - Teoría Macroeconómica 2 Table of contents 1. The representative
Cost Minimization and Cost Curves. Beattie, Taylor, and Watts Sections: 3.1a, 3.2a-b, 4.1
Cost Minimization and Cost Curves Beattie, Talor, and Watts Sections: 3.a, 3.a-b, 4. Agenda The Cost Function and General Cost Minimization Cost Minimization ith One Variable Input Deriving the Average
ECON 312/302: MICROECONOMICS II Lecture 6: W/C 7 th March 2016 FACTOR MARKETS 1 Dr Ebo Turkson. Chapter 15. Factor Markets Part 1
ECON 312/302: MICROECONOMICS II Lecture 6: W/C 7 th March 2016 FACTOR MARKETS 1 Dr Ebo Turkson Chapter 15 Factor Markets Part 1 1 Topics Competitive Factor Market. Competitive factor and output markets