B200.F09.W08.Costs.Competition.Clsnts

B200.F09.W08.Costs.Competition.Clsnts - BUAD 200 Fall 2009:...

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Unformatted text preview: BUAD 200 Fall 2009: Classnotes: Week 08: October12-14, 2009 The Organization of the Firm 1. Teamwork & Specialization 2. Teamwork Shirking 3. Shirking Monitoring 4. Profits monitor the Owner Firms attempt to Maximize Profits: = TR -TC; TR = PxQ which is a function of demand facing the firm. TC is a positive function of output. TC increases as output increases. So the question is, What rate of output maximizes profit ? NEW: First we study Costs. Chapter12 Different decisions faced by owners involve different assumptions. Before going into a business, we consider Long-Run Analysis where all the inputs are variable . Since you can vary all inputs, all costs are variable i.e. no fixed costs. Once you have started in business you are making Short-Run decisions where some inputs are fixed and some are variable therefore some costs are fixed and some are variable. Operating a Widget Factory: In the short-run some costs are fixed: Total Fixed Costs = $ 100 / day. Building Lease: $30/day Equipment Lease: $20/day Opportunity Cost of Owner/manager: $50/day Analyze output decisions : Different rates of output require different amounts of variable inputs, here the number of workers. Workers 1 2 3 4 5 6 7 8 9 10 Output Q 10 25 45 62 76 86 91 95 97 98 Marginal Product 10 15 20 17 14 10 5 4 2 1 Total Cost 10 120 140 160 180 200 220 240 260 280 300 TC 20 20 20 20 20 20 20 20 20 20 Marginal Cost-- $2.00 $1.3 3 $1.0 $1.1 8 $1.4 3 $2.0 $4.0 $5.0 $10.0 $20.00 Average Cost...
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This note was uploaded on 11/07/2009 for the course BUAD 200x at USC.

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B200.F09.W08.Costs.Competition.Clsnts - BUAD 200 Fall 2009:...

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