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Section_4_Notes

Section_4_Notes - Section 4 Section Notes EWMBA201A Eva...

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September 19, 2009 Section 4 Section Notes 1 Section 4 Section Notes EWMBA201A Eva Vivalt

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September 19, 2009 Section 4 Section Notes 2 Administrative Stuff 1. Recap of evaluations: 1. More of everything: intuition (helping with thought problems), numbers problems, extra problems, real-world examples. 2. Questions that are less crucial can be saved for after class. 3. Extra time after class. 4. I’ll distribute a pre-exam guide with more sample problems to work through and if you have questions on them you can ask me in office hours after section. 2. Sunk costs and Mid-term
September 19, 2009 Section 4 Section Notes 3 Recap of Costs Sunk Costs “Don’t worry about things you cannot change” Opportunity Costs “Always know what ALL your options are” Over the relevant time horizon… Total Costs: C(q) Fixed Costs: Not dependant on quantity produced: C(0) Variable Costs: C(q)-C(0) Marginal Costs: Cost of increasing q by a small amount: dC(q)/dq Average Total Costs: C(q)/q Average Variable Costs: vC(q)/q

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September 19, 2009 Section 4 Section Notes 4 All the calculus it might be helpful to know Derivative of A + BQ + CQ 2 = B + 2CQ To minimize or maximize something: 1) Take its derivative (with respect to whatever it is that we are choosing, e.g. quantity to produce). 2) Set it equal to 0. 3) Solve for what we are choosing (e.g. Q).
September 19, 2009 Section 4 Section Notes 5 Thought Exercise What’s the difference between average cost and marginal cost? Between average variable cost and marginal cost?

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September 19, 2009 Section 4 Section Notes 6 Thought Exercise What’s the difference between average cost and marginal cost? Between average variable cost and marginal cost? Marginal cost is the incremental cost of producing an additional unit. Average cost is the per unit cost of production, over all units produced.
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