Cost of Production Analysis - Principles of Economics | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Microeconomics
A. Firm behavior and the organization of industry I. The cost of production 1. Quick quiz
_ Accounting profit = TR – Explicit Cost
_ Economic profit = TR – (Explicit + Implicit)  Key = 50 and 10
_ Diminishing marginal product explains why, as a firm’s out put increases,
the production function gets flatter, while the total cost curve gets steeper
MC= TC’(1000)= TC(1001) – TC(1000) ATC = TC/Q  Key = $8 and $5
_ TC= $500 => MC= $15 => ATC decreases
_ $1000/ all the pizzas => shift ATC and AFC
_ Specialization => Output increase and TC is constant => ATC decreases
2. Problems and Applications
_ What you give up in taking some actions called the OC
_ Average total cost is falling when marginal cost is below it and rising when marginal cost is above it
_ A cost that does not depend on the quantity produced is fixed cost _ Variable cost _ P = TR – TC
_ The cost of producing one extra unit of product is the MC
OC is what you give up => rent + job quitting (550,000/ year)
_ She should not open => reason: TC=550,000/ year while TR=510,000/ year
The more hours => the flatter the curve is => Reason: diminishing marginal cost Chart Title 40 35 30 25 20 15 10 5 0 1 2 3 4 5 OC FC TC Workers Output MP TC ATC MC 0 0 20 200 100 1 20 30 300 100 2 50 40 400 100 3 90 30 500 100 4 120 20 600 100 5 140 10 700 100 6 150 5 800 100 7 155 900 100
_ MP increase then decrease => Explanation: Increase: More workers does
not reach the limit of factory, Decrease: reach the limit => more workers less land _MP increase => MC decrease
_ MC=TC(601)-TC(600)= 180,901 – 180,000 =$901 => should not _ FC=300 _ Quantity TC AMC VC AMVC 0 300 50 1 350 2 390 3 420 4 450 5 490 6 540
Similar => Reason: TC= FC (fixed)+VC Q 1 2 3 4 5 6 7 VC 10 20 40 80 160 320 640 TC 210 220 240 280 360 520 840 ATC 210 110 80 70 72 87 120