Ch. 13 Costs of Production

Ch. 13 Costs of Production - Chapter 13 The Costs of...

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The Costs of Production Chapter 13
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Warning from page 268 “This topic is dry and technical. To be honest, one might even call it boring. BUT (emphasis added) this material provides a crucial foundation for the fascinating topics that follow.” Why do costs matter?
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The Supply Relationship, Ch. 4 Determinants of Supply Price of output Price of inputs Technology Expectations Number of producers Law of Supply Other things equal, when the price of a good rises, the quantity supplied of the good also rises.
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Why do firms exist? What do business owners want to accomplish? Economists assume firms want to maximize profits. Profits = Total Revenue – Total Costs What quantity maximizes a firm’s profits?
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Total Costs in more detail Different kinds of inputs, different kinds of costs Different views held by economists and accountants TOTAL means all opportunity costs whether or not a monetary payment is made NOTE: we will ignore externalities in this chapter, so we really mean all private opportunity costs .
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Economic vs. Accounting Profit Econ. profit = total rev. – explicit AND implicit costs Acctg. Profit = total rev. – explicit costs Does positive accounting profit always mean a company should stay in business? Does zero economic profit mean a company should get out of business? How does “depreciation” fit into these
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“OGG” – your very own start-up!
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Ch. 13 Costs of Production - Chapter 13 The Costs of...

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