Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice.

Slides:

Advertisements

Similar presentations

Chapter 10: Production and Cost Estimation McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Advertisements

Chapter 10: Production and Cost Estimation McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Production & Cost Estimation

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10: Production and Cost Estimation.

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 10 Production and Cost Estimation.

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice.

Chapter 9: Production and Cost in the Long Run

Chapter 9: Production and Cost in the Long Run McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Production & Cost in the Long Run

McGraw-Hill/Irwin Copyright  2006 by The McGraw-Hill Companies, Inc. All rights reserved. PRODUCTION AND COST ANALYSIS I PRODUCTION AND COST ANALYSIS.

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice.

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 11: Managerial Decision in Competitive Markets.

CHAPTER 5 The Production Process and Costs Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior.

MICROECONOMICS: Theory & Applications

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice.

Managerial Decisions in Competitive Markets

© The McGraw-Hill Companies, 2008 Chapter 7 Costs and supply David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 9th Edition, McGraw-Hill, 2008.

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice.

Copyright © 2005 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics Thomas Maurice eighth edition Chapter 8.

Chapter 8: Production and Cost in the Short Run McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Chapter 8: Production and Cost in the Short Run McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

9 - 1 Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.

The Costs of Production 1 22 C H A P T E R Costs exist because resources Are scarce Productive Have alternative uses Use of a resource in a specific.

Managerial Decisions in Competitive Markets

Production and Cost Production Function Inputs Output (s) Cost Function At Given Output Level Inputs Unit Input Needed Price Based on Production Function.

© Mcgraw-Hill Companies, 2008 Farm Management Chapter 9 Cost Concepts in Economics.

Businesses and the Costs of Production

ECNE610 Managerial Economics APRIL Dr. Mazharul Islam Chapter-6.

Chapter SixCopyright 2009 Pearson Education, Inc. Publishing as Prentice Hall. 1 Chapter 6 The Theory and Estimation of Production.

© The McGraw-Hill Companies, 2005 Chapter 7 Costs and supply David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 8th Edition, McGraw-Hill, 2005.

Chapter 10 Production Profit Definitions. What is a firm? A firm is a business organization that brings together and coordinates the factors of production.

Introduction: Thinking Like an Economist 1 CHAPTER 11 Production and Cost Analysis I Production is not the application of tools to materials, but logic.

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

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

Production and Cost Analysis I 12 Production and Cost Analysis I Production is not the application of tools to materials, but logic to work. — Peter Drucker.

Businesses and the Costs of Production 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.

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

The Production Process and Costs

9.1 Chapter 9 – Production & Cost in the Short Run  Our focus has been on the fact that firm’s attempt to maximize profits. However, so far we have only.

Chapter 6 The Theory and Estimation of Production

Chapter 11: Managerial Decisions in Competitive Markets

COSTS OF THE CONSTRUCTION FIRM

Michael Parkin ECONOMICS 5e Output and Costs 1.

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

Cost Theory and Estimation Dr Nihal Hennayake

Choosing output REVENUES COSTS AR Demand curve AC (short & long run)

# McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Businesses and Their Costs 6.

Prof. Ana Corrales ECO 2023 Notes Ch. 22: The Costs of Production Economic/Opportunity Cost: Value or worth of any resource used to produce a good from.

Copyright © 2005 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics Thomas Maurice eighth edition Chapter 9.

The Costs of Production

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8: Production and Cost in the Short Run.

CHAPTER 7 Costs and supply ©McGraw-Hill Education, 2014.

Copyright © 2005 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics Thomas Maurice eighth edition Chapter 7.

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

Managerial Economics and Organizational Architecture, 5e Managerial Economics and Organizational Architecture, 5e Chapter 5: Production and Cost Copyright.

Businesses and the Costs of Production 9 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Introduction: Thinking Like an Economist 1 CHAPTER 11 Production and Cost Analysis I Production is not the application of tools to materials, but logic.

McGraw-Hill/Irwin Chapter 6: Businesses and Their Costs Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Copyright  2004 McGraw-Hill Australia Pty Ltd PPTs t/a Economic Principles by Jackson, McIver, Bajada and Hettihewa Slides prepared by Muni Perumal, University.

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

Chapter 8: Production and Cost in the Short Run

Businesses and the Costs of Production

10 Businesses and the Costs of Production McGraw-Hill/Irwin

Production & Costs in the Short-run

Businesses and the Costs of Production

The Costs of Production

Businesses and the Costs of Production

Chapter 8: Production and Cost in the Short Run

Presentation transcript:

Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice ninth edition Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Managerial Economics, 9e Managerial Economics Thomas Maurice ninth edition Chapter 10 Production & Cost Estimation

Managerial Economics 10-2 Empirical Production Function Cubic empirical specification for a short-run production function is derived from a long-run cubic production function Cubic form of the long-run production function is expressed as

Managerial Economics 10-3 Properties of a Short-Run Cubic Production Function Holding capital constant, short-run cubic production function is derived as follows:

Managerial Economics 10-4 Properties of a Short-Run Cubic Production Function The average & marginal products of labor are, respectively:

Managerial Economics 10-5 Properties of a Short-Run Cubic Production Function Marginal product of labor begins to diminish beyond L m units of labor

Managerial Economics 10-6 MP & AP Curves for the Short-Run Cubic Production Function (Figure 10.1) Q = AL 3 + BL 2

Managerial Economics 10-7 Properties of a Short-Run Cubic Production Function To have necessary properties of a production function, parameters must satisfy the following restrictions:

Managerial Economics 10-8 Estimation of a Short-Run Production Function To use linear regression analysis, the cubic equation must be transformed into linear form Q = AX + BW Where X = L 3 and W = L 2 Estimated regression line must pass through the origin Specify in computer routine

Managerial Economics 10-9 Estimation of a Short-Run Cost Function Estimate using data for which the level of usage of one or more inputs is fixed Usually time series data are used Data collection may be complicated by the fact that accounting data do not include firm’s opportunity costs Capital costs should reflect not only acquisition cost but any foregone rental income, depreciation, & capital gains/losses Must eliminate effects of inflation Divide by appropriate price index

Managerial Economics Properties of a Short-Run Cubic Cost Function Average variable cost & marginal cost functions are, respectively:

Managerial Economics Properties of a Short-Run Cubic Cost Function Average variable cost reaches its minimum value at: To conform to theoretical properties, parameters must satisfy the following restrictions:

Managerial Economics Properties of a Short-Run Cost Function Cubic specification produces S-shaped TVC curve & U-shaped AVC & SMC curves All three cost curves employ the same parameters Only necessary to estimate one of these functions to obtain estimates of all three In the short-run cubic specification, input prices are assumed constant Not explicitly included in cost equation

Managerial Economics Summary of Short-Run Empirical Production Functions Short-run cubic production equations Total product Average product of labor Marginal product of labor Diminishing marginal returns Restrictions on parameters

Managerial Economics Summary of Short-Run Empirical Cost Functions Short-run cubic cost equations Total variable cost Average variable cost Marginal cost Average variable cost reaches minimum at Restrictions on parameters