Chapter 8 Micro - McConnell-Brue - Costs of Production

Chapter 8 Micro - McConnell-Brue - Costs of Production -...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 212X Principles of Microeconomics
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Chapter 8 The Costs of Production
Background image of page 2
I. Economic Costs - These are the payments a firm must make to resource suppliers to attract those resources away from their best alternative production opportunities A. Explicit Costs – payments to non-owners for resources they supply - these are cash expenditures to “outsiders” who supply labor, fuel, materials, transportation services, etc.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
A. Implicit Costs – money payments the self- employed resources could have earned in their best alternative employment. - these are similar to implicit costs A. Accounting Profits - Total Revenue – explicit costs. .
Background image of page 4
D. Normal Profits – are considered an implicit cost because they are the minimum payments required to keep the owner’s abilities employed - these are the payments one would otherwise receive for performing entrepreneurial functions. E. Economic Profits - are equal to total revenue minus all costs (explicit and implicit including normal profit) - if Total Revenue > Costs, then the residuals go to the entrepreneur
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
A. Short-run – the time period that is too brief for a firm to alter its plant capacity. B. Long-run – the period of time long enough for a firm to change the quantities of all resources, including the plant size.
Background image of page 6
II. Short-Run Production Relationships A. Short-run production reflects the law of diminishing returns that states that as successive units of a variable resource are added to a fixed resource, beyond some point the product attributable to each additional resource unit will decline.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. Total product (TP) – the total
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 29

Chapter 8 Micro - McConnell-Brue - Costs of Production -...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online