{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture11--COSTANDPRODUCTIVITY

# Lecture11--COSTANDPRODUCTIVITY - Cost and Productivity How...

This preview shows pages 1–7. Sign up to view the full content.

Cost and Productivity How cost of production is measured and how it is related to productivity of inputs

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

View Full Document
Economic cost is the monetary value of all inputs used including implicit costs which measure the value of non- purchased inputs
In the short run costs are divided into two categories: Fixed cost (FC): The cost of fixed inputs. Fixed costs do not vary with output and are sometimes called overhead costs Variable costs (VC): The cost of variable input. Variable cost depends on the number of units of output produced

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

View Full Document
Total cost is the sum of fixed cost and variable cost: TC = FC + VC
A Cost Function: Gives the minimum possible cost of producing a given level of output A Point of Diminishing Returns VC= wL Q max 0 B Points above this line are not included in the cost function If labor is the only variable input, variable cost is wL, where w is the wage and L is the quantity of labor Output

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

View Full Document
Derivation of the variable cost curve from the total product curve Point of diminishing Returns B A L Q 0 TP L Point of Maximum Q Step 1: Multiply the amount of labor, L, by the wage.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 17

Lecture11--COSTANDPRODUCTIVITY - Cost and Productivity How...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online