ajaz_eco_204_2012_2013_chapter_16_Market_Power

94 alumina price t alumina 190 alumina cost 36860

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Unformatted text preview: odel: Cost Model From “factoid” From Cost Minimization Problem From Regression Analysis with data on , Estimating cost model by a factoid: We may be able to derive or guesstimate the cost function from some “facts”. For example, here is the cost breakdown of the average primary AL smelter in 1993: Average Primary Aluminum Smelter (1993) All cost figures $/metric ton All variable cost components in italics Capacity (‘000s tpy) 133.02 Electricity usage (kWh/t) 15,800 Electricity price ($/kWh) $0.02 Electricity cost 316 Alumina usage (t/t Al) 1.94 Alumina price ($/t Alumina) $190 Alumina cost 368.60 Other raw materials $125 Plant power and fuel $10 Consumables $70 Maintenance $50 Labor $150 Freight $45 General and Administrative $75 Suppose that the average primary AL smelter has constant returns (i.e. its cost function has the form: 15 ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. ( get: ). Since we can add up the variable cost per ton components to Adding up the fixed cost per on components yields:...
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This document was uploaded on 01/19/2014.

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