Lecture8 - Learning Objectives Delineate the nature of a...

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Learning Objectives Delineate the nature of a firm’s cost – explicit as well as implicit. Outline how cost is likely to vary with output in the short run and various measures of short-run cost. Detail the typical shapes of a firm’s short-run cost curves. See how a firm will choose to combine inputs in its production process in the long run when all inputs are variable. Show how input price changes affect a firm’s cost curves. (Continued)
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Learning Objectives (continued) Differentiate between a firm’s long-run and short-run cost curves. Understand how the minimum efficient scale of production is related to market structure. Cover economies of scope – is it cheaper for one firm to produce products jointly than it is for separate firms to produce the same products independently? Overview how cost functions can be empirically estimated through surveys and regression analysis.
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The Nature of Cost Recall: Explicit costs – arise from transactions in which the firm purchases inputs or the services of inputs from other parties Implicit costs – costs associated with the use of the firm’s own resources and reflect the fact that these resources could be employed elsewhere Opportunity cost reflects both explicit and implicit costs.
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Measures of Short-Run Cost Total fixed cost (TFC) – the cost incurred by the firm that does not depend on how much output it produces Total variable cost (TVC) – the cost incurred by the firm that depends on how much output it produces
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Lecture8 - Learning Objectives Delineate the nature of a...

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