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E251x.F11.W08.Production. Costs

# E251x.F11.W08.Production. Costs - ECON 251x Week 08 Chapter...

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ECON 251x Week 08 Chapter 6 Production

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\$ P x \$ 10 \$ 9 \$ 8 \$ 7 \$ 6 \$ 5 \$ 4 \$ 3 \$ 2 \$ 1 1 2 3 4 5 6 7 8 9 10 11 12 Qty x /T Supply Demand D x S x Market: Demand & Supply At the equilibrium Price , the Dx = Sx Pe Qe
Focus on Supply \$Px Qty x /T Supply

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Supply is based on Marginal Cost Supply is based on Marginal Cost \$Px Qty x /T Supply Height =Marginal Cost
Teamwork 10 people run a grocery cooperative Share equally, jobs & profits Average daily earnings \$ 2000 / 10 = \$ 200 Earnings vary from day to day…

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Teamwork Shirking When earnings are shared among the team there is a tendency for shirking Shirking Decline in earnings Solutions ?
Shirking Monitoring Hire a monitor to reduce shirking Earnings go back up to \$ 2000 / 11 = \$ 182 Problem: the monitor shirks

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Reorganize Firm Employees get fixed wages day to day Predictability is desirable Owner begins to specialize work by worker Increased output and earnings Wages differ by difficulty of task Owner becomes the monitor Owner gets profits after wages (If any)
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