Ch08 - Chapter 8 The Theory and Estimation of Cost...

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    Chapter 8 Chapter 8 The Theory and Estimation of Cost Managerial Economics: Economic Tools for Today’s Decision Makers, 4/e By Paul Keat and Philip Young
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    2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young Before We Start… Group Presentation So popular? Q = aL b K 1-b or c b+c > 1 IRTS b+c = 1 CRTS b+c < 1 DRTS Short Run Analysis: MPK = c Q/K b & c are elasticities of K & L factors LogQ=loga+blogL+clogK + dlogT where T technology
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    2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young The Theory and Estimation of Cost Definition of Cost The Short Run Relationship Between Production and Cost The Short Run Cost Function The Long Run Relationship Between Production and Cost The Long Run Cost Function The Learning Curve
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    2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young Definition of Cost A cost is relevant if it is affected by a management decision. Historical cost is incurred at the time of procurement Replacement cost is necessary to replace inventory Are historical costs relevant?
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    2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young Definition of Cost There are two types of cost associated with economic analysis Opportunity cost is the value that is forgone in choosing one activity over the next best alternative Out-of-pocket cost is actual transfer of value that occur Which cost is relevant?
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    2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young Definition of Cost There are two types of cost associated with time Incremental cost varies with the range of options available in the decision making process. Sunk cost does not vary with decision options. Is sunk cost relevant?
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  2003 Prentice Hall Business Publishing Managerial Economics, 4/e Keat/Young SR Relationship Between Production and Cost A firm’s cost structure is related to its production process. Costs are determined by the production technology and input prices. Assuming that the firm is a “price taker” in
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This note was uploaded on 07/06/2009 for the course MGT BAM313 taught by Professor Na during the Spring '09 term at 東京大学.

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Ch08 - Chapter 8 The Theory and Estimation of Cost...

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