lecture 23 - LECTURE 23 FIRMS COSTS OF PRODUCTION Last...

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2010: LECTURE 23 1 LECTURE 23: FIRMS: COSTS OF PRODUCTION Last class: when calculating cost associated with capital, accountant includes only cost of money borrowed from bank economist includes cost of all money spent on machines, money from bank and money from shareholders. This class: Law of Increasing Marginal Cost Marginal and Average Cost: Marginal Cost curve is upward sloping. Average Total Cost Curve is U-shaped. Mankiw: Chapter 13
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2010: LECTURE 23 2 COST FUNCTION Relationship between output and cost. Machines - each machine costs 600 (‘000 $). - interest rate 12% per year, or 1% per month. - cost of machine per mth: 600 x .01 = 6 (‘000 $) - Fixed cost . Workers - each paid 2 (‘000 $/mth). - Variable Cost.
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