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Class Notes - 10-10-07

# Class Notes - 10-10-07 - Microeconomics Class Notes Total...

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Microeconomics – Class Notes – 10/10/07 Total Costs 1.) Explicit costs +implicit costs a. Implicit costs (Consist of Opportunity Costs) b. When we talk about Total Costs 2.) Total Cost is also calculated as T.C = Fixed Costs + Variable Costs - Fixed costs (F.C): Costs that don’t vary with output o Example: Rent for the building (contract to pay, does not change) - Variable costs (V.C): Costs that increase as we increase production o Example: Labor costs (higher more workers), purdchase more materials 3.) Time period will determine which costs are fixed and which are variable costs. Period of Time o 1.) Short run: At least one input is fixed. o 2.) Long run: All inputs are variable. Can change capital decisions in the long run 4.) Assumption regarding costs: Inputs are Capital (K) and Labor (L) o In the short run, Capital is a fixed cost and Labor is a variable cost Example: The amount of machinery you have is fairly fixed If you want to change production, you will change the number of

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Class Notes - 10-10-07 - Microeconomics Class Notes Total...

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