chap 13- Production & Costs

chap 13- Production & Costs - CostsofProduction...

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Chapter 13 Costs of Production
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Some cost concepts Opportunity Cost Cost as Opportunity cost The cost of something is what you give up to  get it Firm’s cost of production Include all the opportunity costs
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Some cost concepts Explicit costs what we actually pay for use of resources in  business (Input costs that require an outlay of  money by the firm) Implicit costs opportunity costs of resources used but not  actually paid for by the firm (Input costs that  do not require an outlay of money by the firm)
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Profit concepts Accounting profit =Total revenue – Total Explicit costs Economic profit =   Total revenue – (Total Explicit costs + Total Implicit costs) =  Total revenue – Opportunity costs of all resources used  Normal profit    = Zero Economic profit or breaking even  = The minimum cost payment just sufficient to keep the firm in    business 
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Production Function Production function presents the relationship between  quantity of inputs used to make a good and quantity of  output of that good. Assume all factors fixed, except labour
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chap 13- Production & Costs - CostsofProduction...

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