ManEconCh05 - MANAGERIAL ECONOMICS: THEORY, APPLICATIONS,...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
MANAGERIAL ECONOMICS: THEORY, APPLICATIONS, AND CASES W. Bruce Allen | Keith Weigelt | Neil Doherty | Edwin Mansfield CHAPTER  5 The Analysis of Costs
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
OBJECTIVES Explain how managers can use their  knowledge of the relationship between costs  and output to make decisions that maximize  the value of the firm Understand the difference between short- run and long-run costs and the importance  of this distinction for managerial decisions
Background image of page 2
OPPORTUNITY COSTS Definitions Opportunity cost doctrine: The inputs' values  (when used in their most productive way)  together with production costs (the accounting  costs of producing a product) determine the  economic cost of production. Historical cost: The money that managers  actually paid for an input
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
OPPORTUNITY COSTS Definitions (Continued) Explicit costs: The ordinary items accountants include  as the firm's expenses Implicit costs: The forgone value of resources that  managers did not put to their best use Doctrine of sunk costs: Resources that are spent and  cannot be recovered.
Background image of page 4
SHORT-RUN COST  FUNCTIONS Definitions Cost function: Function showing various  relationships between input costs and output  rate. Short run: The time span between one where  the quantity of no input is variable and one  where the quantities of all inputs are variable Fixed inputs: When the quantities of plant and  equipment cannot be altered
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 25

ManEconCh05 - MANAGERIAL ECONOMICS: THEORY, APPLICATIONS,...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online