AP Economics Mr. Bernstein Module 56: Long Run Costs November 2015.

Slides:

Advertisements

Similar presentations

 fixed costs – costs that do not vary with the level of output. Fixed costs are the same at all levels of output (even when output equals zero).  variable.

Advertisements

Long-run (the time it takes for the industry to adjust output to the change in demand or supply) equilibrium for the purely competitive firm P Q ATC MC.

Long Run Average Total Cost Curve. The Long Run Average Total Cost Curve When studying cost curves, remember that we have been in the short run. In the.

THEORY OF PRODUCTION AND COST Class 3. Theory of Production and Cost  Short and Long run production functions  Behavior of Costs  Law of Diminishing.

CH. 11: OUTPUT AND COSTS  Measure of relationship between output and cost  Short run costs  Fixed vs variable  Cost curves  Law of diminishing marginal.

Production and Costs. The How Question? From the circular flow diagram, resource markets determine input or resource prices. Profit-maximizing firms select.

Next Week Complete Homework 8 on Homework advantage by Sunday, October 1 at 11:55 pm. Read Chapter 9, Perfect Competition and the Supply Curve.

Chapter 6 Production and Cost

Part 5 The Theory of Production and Cost

Copyright©2004 South-Western 13 The Costs of Production.

Chapter 8 – Costs and production. Production The total amount of output produced by a firm is a function of the levels of input usage by the firm The.

Production and Costs.

Ch. 21: Production and Costs Del Mar College John Daly ©2003 South-Western Publishing, A Division of Thomson Learning.

Behind the Supply Curve:

 Economists assume goal of firms is to maximize profit  Profit = Total Revenue – Total Cost  In other words: Amount firm receives for sale of output.

Long Run Cost and Economies of Scale. Long run average total cost curve (LRATCC) ▫Shows the relationship between output and average total cost when fixed.

Figure Economists versus accountants 1 1 Economists include all opportunity costs when analyzing a firm, whereas accountants measure only explicit costs.

Short-Run versus Long-Run Costs. Fixed costs are not totally uncontrollable. Fixed costs are not totally uncontrollable. In the long-run, all inputs are.

AP Economics Mr. Bernstein Module 60: Long-Run Outcomes in Perfect Competition November 12, 2014.

The Costs of Production

Theory of Production and cost Week 4. Theory of Production and Cost  Short and Long run production functions  Behavior of Costs  Law of Diminishing.

Principles of Economics Session 5. Topics To Be Covered  Categories of Costs  Costs in the Short Run  Costs in the Long Run  Economies of Scope.

8 - 1 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run Costs Graphically Productivity and.

1 Economic Costs. By the end of this section, you should be able to….. Define and calculate total cost, average cost, and marginal cost. Define and calculate.

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. The Costs of Production Chapter 8.

COST OF PRODUCTION. 2 Graphing Cost Curves Total Cost Curves: The total variable cost curve has the same shape as the total cost curve— increasing output.

Principles of Microeconomics : Ch.13 Second Canadian Edition Chapter 13 The Costs of Production © 2002 by Nelson, a division of Thomson Canada Limited.

Economies of Scale Chapter 13 completion. The Shape of Cost Curves Quantity of Output Costs $ MC ATC AVC AFC.

20 The Costs of Production Economic Costs Economic Cost / Opportunity Cost –the measure of any resource used to produce a good is the value or worth.

Lecture Notes: Econ 203 Introductory Microeconomics Lecture/Chapter 13: Costs of Production M. Cary Leahey Manhattan College Fall 2012.

AP Economics Mr. Bernstein Module 53: Profit Maximization November 4, 2014.

1 Short Run and Long Run Costs Edit 7: Ch. 5 Pages Edit 6: Ch. 5 Pages

© 2007 Worth Publishers Essentials of Economics Krugman Wells Olney Prepared by: Fernando & Yvonn Quijano.

Micro E conomics Unit 7 Slide 1 Created: Jan 2007 by Jim Luke. Division of labour is the great cause of its increased power, as may be better understood.

Businesses and the Costs of Production 07 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Copyright©2004 South-Western Mod 56 The Costs of Production.

Production and Costs. Economic versus Accounting Costs Economic costs are theoretical constructs which are intended to aid in rational decision-making.

Cost Curve Model Chapter 13 completion. Costs of Production Fixed costs - do not change with quantity of output Variable costs - ↑ with quantity of output.

 When you study for an exam for happens to the marginal benefit as you spend more time studying?  Is the 4 th hour of studying more valuable than the.

TUMAINI UNIVERSITY FACULTY OF BUSINESS ADM Managerial Economics G. Loth.

AP Economics Mr. Bernstein Module 55: Firm Costs November 2015.

AP Economics Mr. Bernstein Module 54: The Production Function November 2015.

Long-Run Costs and Economies of Scale Module 56. Behind the Supply Curve.

1 Thinking About Costs A firm’s total cost of producing a given level of output is the opportunity cost of the owners – Everything they must give up in.

Long Run Costs Module KRUGMAN'S MICROECONOMICS for AP* Micro:

1 of 41 chapter: 12 >> Krugman/Wells Economics ©2009  Worth Publishers Behind the Supply Curve: Inputs and Costs.

Costs/Productivity - Part 4 (Pp of textbook) M. Padula AIS Theory of the Firm Part I.

Production and Cost in the Long Run Nihal Hennayake.

October 30, 2014 AP Economics 1.Return and Review Quiz 2.Lesson 3-3: LRATC.

Chapter 4: Production and the Costs of Production

8 The Costs of Production.

Economic Growth in Macroeconomic Models

Module 23 Long-Run Costs and Economies of Scale

Short-run Vs. Long-run Costs

20 The Costs of Production.

Mr. Bernstein Module 54: The Production Function November 2016

Chapter 5: Competition and Monopoly: Virtues and Vices

Cost Curve Model Chapter 13 completion.

Maximizing Profit with Cost Curves

Mr. Bernstein Module 56: Long Run Costs November 2017

MODULE 56 : LONG-RUN COSTS AND ECONOMIES OF SCALE

Cost Curve Model Chapter 13 completion.

8 The Costs of Production.

Production And Cost in the Long Run

Economies of Scale Lesson 9 Sections 56, 57.

Economies of Scale Chapter 13 completion.

ECON 211 ELEMENTS OF ECONOMICS I

Long Run Costs Module KRUGMAN'S MICROECONOMICS for AP* Micro:

20 The Costs of Production.

Production and Costs (Part 3)

Presentation transcript:

AP Economics Mr. Bernstein Module 56: Long Run Costs November 2015

AP Economics Mr. Bernstein Long Run Costs versus Short Run Costs In the Long Run, firms can change Fixed Costs The LRATC is U-shaped Fixed cost is chosen to minimize ATC for each level of output 2

AP Economics Mr. Bernstein Long Run Costs versus Short Run Costs Firms find themselves on Short Run cost curves corresponding to current level of fixed cost, and move along that curve when output is changed But in reality many possible Short Run cost curves are possible, each with its own level of fixed cost Over Long Run, firms adjust Fixed Costs based on expectations of future output LRATC is equivalent to a series of snapshots of a firm, taken after adjustments to fixed costs 3

AP Economics Mr. Bernstein Economies of Scale LRATC is falling as output increases Specialization High Setup Costs spreading out Bulk resource purchase discounts Diseconomies of scale also exist LRATC rises as output increases Increasing costs of management and coordination in large, complex organizations 4

AP Economics Mr. Bernstein Sunk costs Money has been spent and cannot be recovered Does not impact marginal values Does not factor in decision-making 5