Econ 281 Chapter7a - Chapter 7 Costs and Cost Minimization...

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1 Chapter 7: Costs and Cost Minimization Consumers purchase GOODS to maximize their utility. This consumption depends upon a consumer’s INCOME and the PRICE of the goods Firms purchase INPUTS to produce OUTPUT This output depends upon the firm’s FUNDS and the PRICE of the inputs
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2 Chapter 7: Costs and Cost Minimization In this chapter we will cover: Different Types of Cost -Explicit and Implicit Costs -Opportunity Costs -Economic and Accounting Costs Isocost Lines Cost Minimization Short-Run and Long-Run situations
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3 Explicit Costs:   Costs that involve an exchange of  money -ie: Rent, Wages, Licence, Materials Implicit Costs:   Costs that don’t involve an  exchange of money -ie: Wage that could have been earned working  elsewhere; profitability of a goat if used mowing  lawns instead of for meat
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Definition:   Value of the next best  alternative; total benefit of choosing the  next best option IE: Instead of opening his own Bait shop, which cost $5,000 per month to run, Buck could have worked for Worms R Us for $2,000 per month. His opportunity cost is $2,000 (alternate wage) +
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This note was uploaded on 03/14/2009 for the course ECON ECON 281 taught by Professor Priemaza during the Fall '08 term at University of Alberta.

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Econ 281 Chapter7a - Chapter 7 Costs and Cost Minimization...

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