Types of Cost Curves. Chapter Twenty-One. Types of Cost Curves. Types of Cost Curves. Fixed, Variable & Total Cost Functions
|
|
|
- Kimberly Griffin
- 5 years ago
- Views:
Transcription
1 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 the graph of a firm s average total cost function. Tpes of Cost An average variable cost curve is the graph of a firm s average variable cost function. An average fixed cost curve is the graph of a firm s average fixed cost function. A marginal cost curve is the graph of a firm s marginal cost function. Tpes of Cost How are these cost curves related to each other? How are a firm s long-run and shortrun cost curves related? 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 var with the firm s output level. c v () is the total cost to a firm of its variable inputs when producing output units. c v () is the firm s variable cost function. c v () depends upon the levels of the fixed inputs. Fixed, Variable & Total Cost Functions c() is the total cost of all inputs, fixed and variable, when producing output units. c() is the firm s total cost function; c( ) = F+ cv ( ). 1
2 c v () F c v () c ( ) = F+ cv ( ) c() c v () F F F Av. Fixed, Av. Variable & Av. Total Cost The firm s total cost function is c( ) = F+ cv ( ). For >, the firm s average total cost function is F c AC v ( ) ( ) = + = AFC ( ) + AVC ( ). Av. Fixed, Av. Variable & Av. Total Cost What does an average fixed cost curve look like? F AFC( ) = AFC() is a rectangular hperbola so its graph looks like... 2
3 AFC() as Av. Fixed, Av. Variable & Av. Total Cost In a short-run with a fixed amount of at least one input, the Law of Diminishing (Marginal) Returns must appl, causing the firm s average variable cost of production to increase eventuall. AFC() AVC() AVC() AFC() Av. Fixed, Av. Variable & Av. Total Cost And ATC() = AFC() + AVC() ATC() = AFC() + AVC() ATC() AVC() AFC() 3
4 Since AFC() as, ATC() AVC() as. AFC() = ATC() - AVC() ATC() ATC() AFC AVC() AFC AVC() AFC() AFC() Since AFC() as, ATC() AVC() as. And since short-run AVC() must eventuall increase, ATC() must eventuall increase in a short-run. ATC() AVC() Marginal Cost Function Marginal cost is the rate-of-change of variable production cost as the output level changes. That is, c MC( ) v ( ) =. AFC() Marginal Cost Function The firm s total cost function is c ( ) = F+ cv ( ) and the fixed cost F does not change with the output level, so c MC v ( ) c ( ) ( ) = =. MC is the slope of both the variable cost and the total cost functions. Marginal and Variable Cost Functions Since MC() is the derivative of c v (), c v () must be the integral of MC(). That is, c MC v ( ) ( ) = cv ( ) = MC( z) dz. 4
5 Marginal and Variable Cost Functions cv ( ) = MC( z) dz MC() How is marginal cost related to average variable cost? Area is the variable cost of making units c Since AVC v ( ) ( ) =, AVC( ) MC( ) 1 cv ( ) =. 2 c Since AVC v ( ) ( ) =, AVC( ) MC( ) 1 cv ( ) =. 2 Therefore, AVC ( ) > = MC > as ( ) = c v ( ). < < c Since AVC v ( ) ( ) =, AVC( ) MC( ) 1 cv ( ) =. 2 Therefore, AVC ( ) > = MC > as ( ) = c v ( ). < < AVC( ) > > c MC( ) v ( ) = as = = AVC( ). < < AVC( ) > > = as MC( ) = AVC( ). < < 5
6 AVC( ) MC( ) < AVC( ) < MC() MC() AVC() AVC() AVC( ) MC( ) > AVC( ) > AVC( ) MC( ) = AVC( ) = MC() MC() AVC() AVC() AVC( ) MC( ) = AVC( ) = The short-run MC curve intersects the short-run AVC curve from MC() below at the AVC curve s minimum. c ( ) Similarl, since ATC( ) =, ATC( ) MC( ) 1 c( ) =. 2 AVC() 6
7 c ( ) Similarl, since ATC( ) =, ATC( ) MC( ) 1 c( ) =. 2 Therefore, ATC( ) > > = as MC( ) = c( ). < < c ( ) Similarl, since ATC( ) =, ATC( ) MC( ) 1 c( ) =. 2 Therefore, ATC( ) > > = as MC( ) = c( ). < < ATC( ) > > c ( ) = as MC( ) = = ATC( ). < < ATC( ) > = < as > MC( ) = ATC( ) < MC() ATC() The short-run MC curve intersects the short-run AVC curve from below at the AVC curve s minimum. And, similarl, the short-run MC curve intersects the short-run ATC curve from below at the ATC curve s minimum. MC() ATC() AVC() A firm has a different short-run total cost curve for each possible shortrun circumstance. Suppose the firm can be in one of just three short-runs; x 2 = x 2 or x 2 = x 2 x 2 < x 2 < x 2. or x 2 = x 2. 7
8 = w 2 x 2 c s (;x 2 ) = w 2 x 2 = w 2 x 2 c s (;x 2 ) c s (;x 2 ) = w 2 x 2 = w 2 x 2 A larger amount of the fixed input increases the firm s fixed cost. c s (;x 2 ) c s (;x 2 ) c = w 2 x 2 s (;x 2 ) = w 2 x 2 A larger amount of the fixed c s (;x 2 ) input increases the firm s fixed cost. Wh does a larger amount of the fixed input reduce the slope of the firm s total cost curve? MP 1 is the marginal phsical productivit of the variable input 1, so one extra unit of input 1 gives MP 1 extra output units. Therefore, the extra amount of input 1 needed for 1 extra output unit is MP 1 is the marginal phsical productivit of the variable input 1, so one extra unit of input 1 gives MP 1 extra output units. Therefore, the extra amount of input 1 needed for 1 extra output unit is 1/ MP 1 units of input 1. 8
9 MP 1 is the marginal phsical productivit of the variable input 1, so one extra unit of input 1 gives MP 1 extra output units. Therefore, the extra amount of input 1 needed for 1 extra output unit is 1/ MP 1 units of input 1. Each unit of input 1 costs w 1, so the firm s extra cost from producing one extra unit of output is MP 1 is the marginal phsical productivit of the variable input 1, so one extra unit of input 1 gives MP 1 extra output units. Therefore, the extra amount of input 1 needed for 1 extra output unit is 1/ MP 1 units of input 1. Each unit of input 1 costs w 1, so the firm s extra cost from producing one extra unit of output is w MC = 1. MP1 MC = w 1 MP1 is the slope of the firm s total cost curve. MC = w 1 MP1 is the slope of the firm s total cost curve. If input 2 is a complement to input 1 then MP 1 is higher for higher x 2. Hence, MC is lower for higher x 2. That is, a short-run total cost curve starts higher and has a lower slope if x 2 is larger. = w 2 x 2 = w 2 x 2 = w 2 x 2 c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) The firm has three short-run total cost curves. In the long-run the firm is free to choose amongst these three since it is free to select x 2 equal to an of x 2, x 2, or x 2. How does the firm make this choice? 9
10 For, choose x 2 =? c s (;x 2 ) For, choose x 2 = x 2. c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) For, choose x 2 = x 2. For, choose x 2 =? c s (;x 2 ) c s (;x 2 ) For, choose x 2 = x 2. c s (;x 2 ) For, choose x 2 = x 2. c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) For, choose x 2 = x 2. c s (;x 2 ) For, choose x 2 = x 2. For <, choose x 2 =? c s (;x 2 ) For, choose x 2 = x 2. c s (;x 2 ) For, choose x 2 = x 2. For <, choose x 2 = x 2. c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) 1
11 For, choose x 2 = x 2. c s (;x 2 ) For, choose x 2 = x 2. For <, choose x 2 = x 2. c s (;x 2 ) c s (;x 2 ) c(), the firm s longrun total cost curve. The firm s long-run total cost curve consists of the lowest parts of the short-run total cost curves. The long-run total cost curve is the lower envelope of the short-run total cost curves. If input 2 is available in continuous amounts then there is an infinit of short-run total cost curves but the long-run total cost curve is still the lower envelope of all of the short-run total cost curves. c s (;x 2 ) c s (;x 2 ) c s (;x 2 ) c() Short-Run & Long-Run Average Total Cost For an output level, the long-run total cost curve alwas gives the lowest possible total production cost. Therefore, the long-run av. total cost curve must alwas give the lowest possible av. total production cost. The long-run av. total cost curve must be the lower envelope of all of the firm s short-run av. total cost curves. Short-Run & Long-Run Average Total Cost E.g. suppose again that the firm can be in one of just three short-runs; x 2 = x 2 or x 2 = x 2 (x 2 < x 2 < x 2 ) or x 2 = x 2 then the firm s three short-run average total cost curves are... 11
12 AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) Short-Run & Long-Run Average Total Cost The firm s long-run average total cost curve is the lower envelope of the short-run average total cost curves... AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) The long-run av. total cost AC() curve is the lower envelope of the short-run av. total cost curves. Q: Is the long-run marginal cost curve the lower envelope of the firm s short-run marginal cost curves? Q: Is the long-run marginal cost curve the lower envelope of the firm s short-run marginal cost curves? A: No. The firm s three short-run average total cost curves are... 12
13 AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) MC s (;x 2 ) AC() MC s (;x 2 ) AC() AC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) For an output level >, the longrun marginal cost of production is the marginal cost of production for the short-run chosen b the firm. MC s (;x 2 ) MC(), the long-run marginal cost curve. 13
14 AC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) MC s (;x 2 ) AC s (;x 2 ) AC s (;x 2 ) MC(), the long-run marginal cost curve. For an output level >, the longrun marginal cost is the marginal cost for the short-run chosen b the firm. This is alwas true, no matter how man and which short-run circumstances exist for the firm. For an output level >, the longrun marginal cost is the marginal cost for the short-run chosen b the firm. So for the continuous case, where x 2 can be fixed at an value of zero or more, the relationship between the long-run marginal cost and all of the short-run marginal costs is... SRACs AC() SRMCs AC() SRMCs MC() AC() For each >, the long-run MC equals the MC for the short-run chosen b the firm. 14
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.
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
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
Short-Run Cost Measures
Chapter 7 Costs 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.
1. The advantage of sole proprietorship over partnership is that: A) it is easier to finance a business where there is only one owner.
Practice multiple choice for chapter 6, Producer theory 1. The advantage of sole proprietorship over partnership is that: A) it is easier to finance a business where there is only one owner. B) a greater
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
The Firm s Short-Run Supply. Decision
The Short-Run The short-run is a period of time in which at least one of the firm s inputs is fixed (as a result of previous decisions). For example, the lease on land ma be for one ear, in which case
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
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
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
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
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
ANSWERS To next 16 Multiple Choice Questions below B B B B A E B E C C C E C C D B
1 ANSWERS To next 16 Multiple Choice Questions below 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 B B B B A E B E C C C E C C D B 1. Economic Profits: a) are defined as profits made because a firm makes economical
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
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.
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
Chapter 7. The Cost of Production
Chapter 7 The Cost of Production Topics to be Discussed Measuring Cost: Which Costs Matter? Cost in the Short Run Cost in the Long Run Long-Run Versus Short-Run Cost Curves Production with Two Outputs:
8a. Profit Maximization by a competitive firm: a. Cost and Revenue: Total, Average and Marginal
8a. Profit Maximization by a competitive firm: a. Cost and Revenue: Total, Average and Marginal The cost of producing any level of output is determined by the quantity of inputs used, and the price per
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
a. If the price per ticket is $45, how much revenue does Sugar Mountain earn?
Econ 3144 Fall 2006 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
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
12/2/2009. Market Structures. pure (perfect) competition monopoly monopolistic competition. oligopoly. Characteristics of Pure Competition
/ (Dollars) (Dollars) 12/2/29 Market Structures pure (perfect) competition monopoly monopolistic competition oligopoly Characteristics of Pure Competition 1. Market has SO MANY firms that no single firm
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
Deriving Firm s Supply Curve
Firm Decision A. The firm calculates the marginal cost of each unit of output B. The firm calculates the marginal revenue of selling each unit of output. For the competitive firm this is the price of output.
A Perfectly Competitive Market. A perfectly competitive market is one in which economic forces operate unimpeded.
Perfect Competition A Perfectly Competitive Market A perfectly competitive market is one in which economic forces operate unimpeded. A Perfectly Competitive Market A perfectly competitive market must meet
Intermediate Microeconomics (22014)
Theor Intermediate Microeconomics (22014) II. Producer Theor Instructor: Marc Teignier-Baqué First Semester, 2011 Theor Outline Part II. Produer Theor Monopol Oligopol 1. Producer Theor Review 1.1 1.2
Exercise questions 3 Summer III, Answer all questions Multiple Choice Questions. Choose the best answer.
1 Exercise questions 3 Summer III, 2008 Answer all questions Multiple Choice Questions. Choose the best answer. 1. The above table shows the short-run total product schedule for the campus book store.
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
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
Perfect Competition. Profit-Maximizing Level of Output. Profit-Maximizing Level of Output. Profit-Maximizing Level of Output
Perfect Competition Maximizing and Shutting Down -Maximizing Level of Output The goal of the firm is to maximize profits. is the difference between total revenue and total cost. -Maximizing Level of Output
The Costs of Production
The of Production P R I N C I P L E S O F ECONOMICS FOURTH EDITION N. GREGORY MANKIW PowerPoint Slides by Ron Cronovich 6 Thomson South-Western, all rights reserved A C T I V E L E A R N I N G : Brainstorming
5 Profit maximization, Supply
Microeconomics I - Lecture #5, March 17, 2009 5 Profit maximization, Suppl We alread described the technological possibilities now we analze how the firm chooses the amount to produce so as to maximize
*** Your grade is based on your on-line answers. ***
Problem Set # 10: IDs 5000-6250 Costs of Production & Short-run Production Decisions Answer the questions below. Then log on to the course web site (http://faculty.tcu.edu/jlovett), go to Microeconomics,
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
Practice MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Practice MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) An example of a variable resource in the short run is A) an employee. B) land. C) a building.
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
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
Marginal Product and Marginal Cost
Marginal Product and Marginal Cost 4. 3rd (decreases from 10, 15 to 11) 5. Greater than a higher MP will increase TP and thus increase APP 6. No, neither output or labor can be negative 7. Yes, if an additional
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
Price Determination under Perfect Competition
rice etermination under erfect Competition NMAL ICE: According to rofessor Marshall, Normal or Natural rice of a commodity is that which economic forces would tend to bring about in the long run. rofessor
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
Test 1 Econ 5000 Spring 2002 Dr. Rupp (Keep your answers covered. Bubble in name and id#)
Test 1 Econ 5000 Spring 2002 Dr. Rupp (Keep your answers covered. Bubble in name and id#) Name 1.The profit maximizing output level for a perfectly competitive firm is where A) P = MC. B) P = AVC. C) MC
CASE FAIR OSTER PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N. PEARSON 2012 Pearson Education, Inc. Publishing as Prentice Hall
PART II The Market System: Choices Made by Households and Firms PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N CASE FAIR OSTER PEARSON 2012 Pearson Education, Inc. Publishing as Prentice Hall
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Chapter 11 practice set Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A firm has successfully adopted a positive technological change when
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
Short Run Competitive Equilibrium. Figure 1 -- Short run Equilibrium for a Competitive Firm
Short Run Competitive Equilibrium In any economy, the determination of prices and outputs of goods and services is largely determined by the degree of competition in the industry 1. What do we mean by
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.
Micro Chapter 8 Study Guide Questions 13e
Micro Chapter 8 Study Guide Questions 13e Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The law of diminishing returns indicates why a. beyond some point,
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
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
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
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,
D
Econ Holmes Fall 9 Some Additional Practice Questions to Get Ready for Midterm Question Let s put Econland in the world economy. Suppose the world price of widgets is $. Suppose Econland is small relative
Chapter 21: The Cost of Production
1. ANSWERS TO END-OF-CHAPTER QUESTIONS 22-1 Distinguish between explicit and implicit s, giving examples of each. What are the explicit and implicit s of attending college? Why does the economist classify
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
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
ECON 310 Fall 2005 Final Exam - Version A. Multiple Choice: (circle the letter of the best response; 3 points each) and x
ECON 30 Fall 005 Final Exam - Version A Name: Multiple Choice: (circle the letter of the best response; 3 points each) Mo has monotonic preferences for x and x Which of the changes described below could
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
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
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
The table below shows the prices of the only three commodities traded in Shire.
Economics 101 Fall 2012 Homework #4 Due 11/20/2012 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).
Bring to Exam: (1) #2 pencil with functioning eraser, (2) calculator (for numerical calculations only) PRACTICE E X A M 2
Midterm Examination on Thursday, October 26, 2017 ****Review Session, Monday, October 23d Genome Scineces Building G100 7:15 pm For Exam: Students are responsible for text material (Chapters 7, 8, 10,
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
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
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
a. If the price the handbag is $298, how much revenue does Coach receive?
Econ 3144 Fall 2005 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 (10 points each
Business Economics Managerial Decisions in Competitive Markets (Deriving the Supply Curve))
Business Economics Managerial Decisions in Competitive Markets (Deriving the Supply Curve)) Thomas & Maurice, Chapter 11 Herbert Stocker herbert.stocker@uibk.ac.at Institute of International Studies University
ECON 102 Boyle Final Exam New Material Practice Exam Solutions
www.liontutors.com ECON 102 Boyle Final Exam New Material Practice Exam Solutions 1. B Please note that these first four problems are likely much easier than problems you will see on the exam. These problems
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
0 $50 $0 $5 $-5 $50 $35 1 $50 $50 $40 $10 $50 $15 2 $50 $100 $55 $45 $50 $35 3 $50 $150 $90 $60 $50 $55 4 $50 $200 $145 $55 $65
I. From Seminar Slides: 1. Output Price Total Marginal Total Marginal Profit Revenue Revenue Cost Cost 0 $50 $0 $5 $-5 1 $50 $50 $40 $10 $50 $15 2 $50 $100 $55 $45 3 $50 $150 $90 $60 $50 $55 4 $50 $200
<Table 1> Total Utility Marginal Utility Total Utility Marginal Utility
Economics 101 Answers to Homework #4 Fall 2009 Due 11/11/2009 before lecture Directions: The homework will be collected in a box before the lecture. Place your name, TA name and section number on top of
a. If the price per ticket is $50, how much revenue does the Rolling Stones receive?
Econ 3144 Spring 2006 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 COSTS OF PRODUCTION. J. Mao
THE COSTS OF PRODUCTION J. Mao Revenue, Costs, and Profit We assume that a firm s goal is to maximize profit. Profit = Total Revenue - Total Costs Costs refer to opportunity costs Explicit costs require
1. What is the vertical intercept of the demand curve above? a. 20 b. 6 c. 120 d. 60 e. 1/6
Econ 3144 Spring 2010 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) 40 Multiple Choice Questions Use the
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
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
Mikroekonomia B by Mikolaj Czajkowski. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Mikroekonomia B by Mikolaj Czajkowski Test 6 - Competitive supply Name Group MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of following
The Theory behind the Supply Curve. Production and Costs
The Theory behind the Supply Curve Production and Costs Production Firms convert inputs (factors of production) into output Fixed Resource resources that DON T change with when output increases ex. a business
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
Economics II - Exercise Session, December 3, Suggested Solution
Economics II - Exercise Session, December 3, 008 - Suggested Solution Problem 1: A firm is on a competitive market, i.e. takes price of the output as given. Production function is given b f(x 1, x ) =
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.
Be able to explain and calculate average marginal cost to make production decisions
Be able to explain and calculate average marginal cost to make production decisions 1 Dr.Vasudeva Rao Kota Assistant Professor, Department of Mathematics, Ambo University, Ethiopia. Long-Run versus Short-Run
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a few firms producing goods that differ somewhat
ECO 100Y L0101 INTRODUCTION TO ECONOMICS. Midterm Test #2
Department of Economics Prof. Gustavo Indart University of Toronto December 3, 2004 SOLUTIONS ECO 100Y L0101 INTRODUCTION TO ECONOMICS Midterm Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS:
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
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
Chapter 8: Costs and the Changes at Firms Over Time Solutions to End-of-Chapter Problems
Chapter 8: Costs and the Changes at Firms Over Time Solutions to End-of-Chapter Problems 1. short run/long run These represent concepts that economists use to describe time. The short run is a period of
ECO 2013: Macroeconomics Valencia Community College
ECO 2013: Macroeconomics Valencia Community College Exam 3 Fall 2008 1. The most important determinant of consumer spending is: A. the level of household debt. B. consumer expectations. C. the stock of
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
The Costs of Production in the long run. M. En C. Eduardo Bustos Farías
The Costs of Production in the long run M. En C. Eduardo Bustos Farías Costs in the Long Run For many firms, the division of total costs between fixed and variable costs depends on the time horizon being
Long-Run Costs and Output Decisions
Chapter 9 Long-Run Costs and Prepared by: Fernando & Yvonn Quijano 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair Long-Run Costs and 9 Chapter Outline Short-Run Conditions
, to its new position, ATC 2
Behind the Supply Curve: Inputs and Costs chapter: 11 1. Changes in the prices of key commodities can have a significant impact on a company s bottom line. According to a September 27, 2007, article in
Properties of Demand Functions. Chapter Six. Own-Price Changes Fixed p 2 and y. Own-Price Changes. Demand
Properties of Demand Functions Chapter Six Demand Comparative statics analsis of ordinar demand functions -- the stud of how ordinar demands (,p 2,) and (,p 2,) change as prices, p 2 and income change.
Whoever claims that economic competition represents 'survival of the fittest' in the sense of the law of the jungle, provides the clearest possible
Whoever claims that economic competition represents 'survival of the fittest' in the sense of the law of the jungle, provides the clearest possible evidence of his lack of knowledge of economics. -George
ECON 102 Brown Exam 2 Practice Exam Solutions
www.liontutors.com ECON 102 Brown Exam 2 Practice Exam Solutions 1. C You know this is an inferior good because the income elasticity of demand is negative. E Q,I = % ΔQd % ΔI = 30% 10% = -3 2. C You know
of Production and the Financing of a Firm
9 Costs of Production and the Financing of a Firm CONCEPTS Explicit Costs Implicit Costs Accounting Costs Economic Costs Short-run Cost Concepts Long-run Cost Concepts Fixed or Total Fixed Cost Overhead
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
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
SCHOLARS INSTITUTE. NOTHING IS IMPOSSIBLE 3207, 2nd Floor Fountain Chowk Mahindra Park Tele :
The SCHOLARS INSTITUTE NOTHING IS IMPOSSIBLE 3207, 2nd Floor Fountain Chowk Mahindra Park Tele : 9868220237 www.yogenius.com M.M. 60 Q 1 A consumer buys 80 units of a good at a price of Rs. 4 per unit.