costs_and_congestion

costs_and_congestion - Open access; i.e. non-excludable...

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Cost And Congestion
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Cost Concepts Sunk costs Not opportunity costs Not recoverable No impact on any economic decision Implicit and explicit costs Implicit costs: opportunity costs not billed Foregone earnings Fixed and variable costs
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Cost Example Output total variable average marginal cost cost cost cost 0 100 1 110 2 130 3 160 4 200 5 250 6 310 7 380 8 460
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Total Cost Curves
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Average and Marginal Cost
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Relationships Fixed cost is the vertical intercept of total cost Total cost and Variable cost are parallel Marginal cost is the slope of total cost (and also the slope of variable cost) Marginal < average: average is falling Marginal = average: average at minimum Marginal > average: average is rising
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Congestion Roads are congestible public goods
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Unformatted text preview: Open access; i.e. non-excludable Congestible; i.e. not non-rival Private cost = average time cost Social cost = marginal time cost External cost = marginal cost average cost Too much use, too much congestion Congestion toll = external cost (at efficient allocation) Bridge Congestion MB = 10 Number average total marginal ext of vehicles cost cost cost cost 1 $2 2 2 3 2 4 3 5 4 6 5 7 6 8 7 9 8 10 9 11 10 12 11 Bridge Congestion Other Applications Toll roads Time of day pricing Roads Electricity Parks Classes? Cordon pricing Central London Manhattan MSU?...
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This note was uploaded on 10/17/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

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costs_and_congestion - Open access; i.e. non-excludable...

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