Class 7-2010

Class 7-2010 - Managerial Economics Class 7...

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THE UNIVERSITY OF BRITISH COLUMBIA Managerial Economics – Class 7 30-September-2010 1. Production Questions 2. Introduction to Costs 3. Opportunity Cost 4. The Cost of Durable Capital Goods 5. Sunk Cost 6. Cost Curves in the Short Run and Long Run 7. Cost Minimization in the Long Run 8. Summary 9. Feedback forms THE UNIVERSITY OF BRITISH COLUMBIA Clicker Question 1 (Production) Wage levels and capital costs vary from country to country. This should affect production techniques. Low wage countries should have labour- intensive production techniques. Which of the following facts about the Ford auto plant in Brazil can be explained using this fact. a. The extensive use of robots. b. Close in-plant integration of Ford with its suppliers. c. Ford’s ability to choose enthusiastic workers. d. The high level of assembly line flexibility e. none of the above.
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THE UNIVERSITY OF BRITISH COLUMBIA Clicker Question 2 Consumer theory and production theory have a similar mathematical structure. Within this structure we can match consumer concepts with production concepts. Which of the following matches does NOT fit the pattern. a. Utility functions and production functions. b. Indifference curves and isoquants. c. The MRS and MRTS. d. Diminishing marginal utility and economies of scale. e. Consumption goods and productive inputs. THE UNIVERSITY OF BRITISH COLUMBIA 2. Introduction to Costs Firms (like Ford) are in business to make profits. Part of making profits involves producing any particular quantity and quality of output at the lowest possible cost. In today’s class we will put together information about costs with information about production from last class to illustrate how this cost- minimization process can be understood.
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THE UNIVERSITY OF BRITISH COLUMBIA 3. Opportunity Cost The opportunity cost of a resource is the best alternative use of that resource. This includes both explicit costs and implicit costs. In deciding whether to use a resource, a manager should always focus on the opportunity cost of that resource. Example: A city is considering building a community centre on some land. If the land is already owned by the city, the cost of the land is implicit. If the land has to be purchased or rented, the cost is explicit.
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Class 7-2010 - Managerial Economics Class 7...

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