Micro2_Chapter7

Micro2_Chapter7 - References: Keat/Young, Managerial...

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Unformatted text preview: References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 1 School of Business International University Mar 2009 References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 2 Introduction ¡ Time: 3 hrs ¡ Readings: – Keat & Young, Chapter 7 ¡ Content: ¡ The Importance of Cost and Managerial Decisions ¡ The Definition and Use of Cost in Economic Analysis ¡ The Relationship Between Production and Cost ¡ The Short Run Cost Function ¡ The Long Run Cost Function ¡ The Learning Curve ¡ Economies of Scope ¡ Economies of Scale: the Short Run Versus the Long Run ¡ Supply Chain Management ¡ Ways Companies Have Cut Costs to Remain Competitive References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 3 Learning Objectives ¡ Define the cost function and explain the difference between a short-run and a long-run cost function. ¡ Explain the linkages between the production function and the cost function. ¡ Distinguish between economic cost and accounting cost. ¡ Explain how the concept of relevant cost is used in the economic analysis of cost. ¡ Define short-run total cost, short-run variable cost, and total fixed cost and explain their relationship to each other. References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 4 Learning Objectives ¡ Define average cost, average variable cost, and average fixed cost and explain their relationship to each other in the short run. Do the same for average cost and average variable cost in the long run. ¡ Compare and contrast the short-run cost function and the long-run cost function and explain why economies of scale is considered to be a long- run phenomenon. ¡ Provide at least four reasons for the existence of economies of scale. References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 5 The Importance of Cost and Managerial Decisions ¡ Ways to contain or cut costs over the past decade – Most common: reduce number of people on the payroll – Outsourcing components of the business – Merge, consolidate, then reduce headcount References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 6 The Definition and Use of Cost in Economic Analysis ¡ Relevant cost : a cost that is affected by a management decision. ¡ Historical cost : cost incurred at the time of procurement. ¡ Opportunity cost : amount or subjective value that is forgone in choosing one activity over the next best alternative. ¡ Incremental cost : varies with the range of options available in the decision....
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This note was uploaded on 07/15/2011 for the course ECON 101 taught by Professor Abcd during the Spring '11 term at RMIT Vietnam.

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Micro2_Chapter7 - References: Keat/Young, Managerial...

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