Lecture_9_for_students

# Lecture_9_for_students - Lecture 9 Click to edit Master...

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Click to edit Master subtitle style 1/1/11 Lecture 9 Costs

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1/1/11 Selection of a production process Technologically efficient The process that produces the desired level of Economically efficient The process that produces the desired
1/1/11 Economic cost Economic Costs=Explicit Costs + Opportunity Costs Explicit Costs

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1/1/11 Example Assume your have started your own firm Explicit costs=40,000 Opportunity cost=25,000 (your salary if you work somewhere else) Economic
1/1/11 Application: waiting for -Taxes pay for public health care in Britain and Canada. -Taxes do not cover for the costs of medical care -Providers ration health care. -Many patients suffer or can not work while waiting. -The average waiting time for a specialist to start cancer treatment in Britain is 62 days. -Are the costs of this waiting large? The economic costs to British employers due to working days lost is £1.5 billion .

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1/1/11 For producing q units of output, we need to use inputs. In the case of two inputs and one output that we discussed in lecture 8, inputs used for production are L and K. Price of L is PL=w and price of K is PK=r. Total cost of Short-Run cost measures
1/1/11 Short-Run cost measures Total Fixed cost (TFC): Total Variable Cost (TVC): It changes with output level TVC TFC TC + = Total cost

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Fixed costs and quasi-fixed costs Fixed costs: These costs are independent from output and firms have to pay for them either they have production or not (Example: paying for the lease of a building). Quasi-fixed costs:
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Lecture_9_for_students - Lecture 9 Click to edit Master...

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