gs_-15_--_Costs_and_the_firm

gs_-15_--_Costs_and_the_firm - ANNOUNCEMENTS (#1): SCHEDULE...

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1 1/14/2010 1 ANNOUNCEMENTS (#1): ± SCHEDULE OF EXAMS (Tentative): o TEST #1 –– DONE! o TEST #2 –Feb. 5 , 2010 o TEST #3 – first week March, 2010 (TBA). o FINAL EXAM – Announced during FINAL EXAM WEEK Lecture 15: COST AND SUPPLY ± THE INDUSTRY AND THE FIRM IN COMPETITION ± TYPES OF COST ± RELATIONSHIPS OF VARIOUS COST CONCEPTS ± THE SUPPLY SCHEDULE OF THE FIRM INDUSTRY AND THE FIRM IN THE COMPETITIVE SETTING
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2 1/14/2010 4 Industry supply and demand market equilibrium The industry is composed of thousands of small firms in a competitive market. 5 The firm’s supply and demand in a competitive industry The firm, being insignificant in size, can sell all its output in relation to the industry – which is large. 1/14/2010 6 Industry and the firm: note that the firm is very small relative to the industry equilibrium. Only the cost schedule of the firm helps to determine how much it will sell in the market.
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3 COST OF THE FIRM 1/14/2010 8 During the short run period, some costs are fixed, others are variable ± Total cost = Fixed cost + Variable cost ± Fixed cost : examples Æ Buildings, heavy machinery that sets the capacity of the firm, some types of labor ± Variable cost : examples Æ wage payments for labor, purchase of raw materials, fuel, other inputs that are used as output rises Some important cost concepts ± Marginal cost Æ MC ± Average cost Æ AC ± Average variable cost AVC ± Average fixed cost AFC
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4 1/14/2010 10 121 111 10 9 151 141 10 10 95 85 10 8 73 63 10 7 55 45 10 6 41 31 10 5 31 21 10 4 25 15 10 3 21 11 10 2 16 6 10 1 10 0 10 0 Average variable cost AVC Average fixed cost AFC Average cost AC Marginal cost MC Total costs TC Variable costs VC Fixed costs FC Quantity of output q From Table 8-1. Different costs of the firm: Total cost TC = FC + VC 26 121 111 10 9 30 151 141 10 10 22 95 85 10 8 18 73 63 10 7 14 55 45 10 6 10 41 31 10 5 6 31 21 10 4 4 25 15 10 3 5 21 11 10 2 6 16 6 10 1 10 0 10 0 Average variable cost AVC Average fixed cost AFC Average cost AC Marginal cost MC Total costs TC Variable costs VC Fixed costs
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This note was uploaded on 04/18/2010 for the course SE 67256 taught by Professor Dr.gerardosicat during the Spring '10 term at University of the Philippines Diliman.

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gs_-15_--_Costs_and_the_firm - ANNOUNCEMENTS (#1): SCHEDULE...

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