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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2010: LECTURE 23 3 Machines (/mth) Workers (/mth) Output (chairs/ mth) Capital costs (‘000 $/mth) Labor costs (‘000 $/mth) Total cost (‘000 $/mth) 10 0 0 60 0 60 10 10 50 60 20 80 10 20 90 60 40 100 10 30 120 60 60 120 10 40 140 60 80 140
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2010: LECTURE 23 4 Fixed Cost Variable Inputs Variable Cost Fixed cost: cost of machines - do not change as output changes.
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This note was uploaded on 10/29/2011 for the course ECON 2010 taught by Professor Mertens,wi during the Spring '07 term at Colorado.

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

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