Copyright©2004 South-Western Mods 52-56 The Costs of Production.

Slides:



Advertisements
Similar presentations
FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
Advertisements

Copyright©2004 South-Western 13 The Costs of Production.
Unit V Costs and Marginal Analysis (Chapter 9). In this chapter, look for the answers to these questions:  Why are implicit as well as explicit costs.
THEORY OF PRODUCTION AND COST Class 3. Theory of Production and Cost  Short and Long run production functions  Behavior of Costs  Law of Diminishing.
The Costs of Production Chapter 13 Copyright © 2004 by South-Western,a division of Thomson Learning.
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Explaining Supply: The Costs of Production Law of Supply u Firms are willing.
1  The Role and Purpose of Firms (Producers)  Economic profit vs accounting profit.  Long-run and short-run production.  The law of diminishing marginal.
© 2007 Thomson South-Western. The Costs of Production The Market Forces of Supply and Demand – Supply and demand are the two words that economists use.
Copyright©2004 South-Western 13 The Costs of Production.
The Costs of Production
Copyright © 2004 South-Western/ WHAT ARE COSTS? A Firm’s Objective The economic goal of a firm is to maximize profits.
 Economists assume goal of firms is to maximize profit  Profit = Total Revenue – Total Cost  In other words: Amount firm receives for sale of output.
1 Chapter 7 Production Costs Key Concepts Summary Practice Quiz Internet Exercises Internet Exercises ©2002 South-Western College Publishing.
Cost of Production ETP Economics 101.
A C T I V E L E A R N I N G 1 Brainstorming costs
Production & Profits. Production and Profits Jennifer and Jason run an organic tomato farm Jennifer and Jason run an organic tomato farm The market price.
Why does production have a cost? because.... Scarcity Inputs are scarce. They have opportunity costs.
FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
The Costs of Production
The Costs of Production (Chapter 21) HAPPY MARCH… ONE WEEK UNTIL SPRING BREAK>>>
Today’s Topic-- Production and Output. Into Outputs Firms Turn Inputs (Factors of Production)
The Costs of Production Chapter 13 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work.
The Costs of Production
PowerPoint Slides prepared by: Andreea CHIRITESCU
By: Christopher Mazzei. Viewpoints The owner of a company wants to keep costs down. An employee of the company wants a high wage or salary. There is always.
The Costs of Production
Defining Profit Lesson 4.52, Understanding Profit (52) Profit = Total Revenue – Total Costs Explicit vs Implicit Costs – Explicit costs require.
March 7th, 2014 Lecture 20 Ch. 10 (up to p. 231) and Ch. 11
Defining Profit Module KRUGMAN'S MICROECONOMICS for AP* Micro:
Economic Profit, Production and Economies of Scale.
Copyright©2004 South-Western The Costs of Production.
The Cost Function Chapter 13.
FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
Review of the previous lecture The consumer optimizes by choosing the point on his budget constraint that lies on the highest indifference curve. When.
Chapter 13 The Cost of Production © 2002 by Nelson, a division of Thomson Canada Limited.
Lecture 8 Producer Theory. Objective of a Firm The main objective of firm is to maximize profit Firms engage in production process But when firm choose.
AP Microeconomics Block 2B – Ryan Higgins. Implicit and Explicit Costs Implicit Costs are not involved in an outlay of money, they are measured by the.
Copyright©2004 South-Western 13 The Costs of Production.
Copyright©2004 South-Western 13 The Costs of Production.
1 Production Costs Economics for Today by Irvin Tucker, 6 th edition ©2009 South-Western College Publishing.
Producer Choice How Firms Behave. What are Profits?
Topics : Accounting profit Average revenue Marginal revenue di Augusta Delle Vedove.
1 Production Costs ©2006 South-Western College Publishing.
5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY.
5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY.
Cost of Production. The Production Function A relationship between the number of units of inputs that a firm employs and the corresponding units of output.
Copyright © 2004 South-Western WHAT IS A COMPETITIVE MARKET? A perfectly competitive market….. There are many buyers and sellers in the market. The goods.
AP Economics Mr. Bernstein Module 52: Defining Profit November 2015.
© 2007 Thomson South-Western WHAT ARE COSTS? The economic goal of business is to maximize profits.
Copyright©2004 South-Western The Costs of Production.
WHAT YOU WILL LEARN IN THIS CHAPTER chapter: 9 >> Krugman/Wells Economics ©2009  Worth Publishers Making Decisions.
Profit, Costs, and Production BEHIND THE SUPPLY CURVE.
The Costs of Production 1. What are Costs? Total revenue –Amount a firm receives for the sale of its output Total cost –Market value of the inputs a firm.
KRUGMAN'S MICROECONOMICS for AP* Defining Profit Margaret Ray and David Anderson Micro: Econ: Module.
The Costs of Production. The Market Forces of Supply and Demand Supply and demand are the two words that economists use most often. Supply and demand.
Chapter 13: Costs of Production. The Supply and Demand In Economy, Supply and Demand Basically runs all market activity. In Economy, Supply and Demand.
Chapter 6 Production, Cost, and Profit © 2001 South-Western College Publishing.
PROFIT MAXIMIZATION. Profit Maximization  Profit =  Total Cost = Fixed Cost + Variable Cost  Fixed vs. Variable… examples?  Fixed – rent, loan payments,
The Costs of Production.  Supply and demand are the two words that economists use most often.  Supply and demand are the forces that make market economies.
Mr. Bernstein Module 52: Defining Profit November 2016
Total Revenue, Total Cost, and Profit
Total Costs Chapter 13.
Chapter 6 Production Costs
Economic Analysis for Managers (ECO 501) Fall:2012 Semester
The Cost Curve Model Chapter 13 Cost Curves.
Presentation transcript:

Copyright©2004 South-Western Mods The Costs of Production

Copyright © 2004 South-Western/ The Firm’s Objective The economic goal of the firm is to maximize profits!!!

Copyright © 2004 South-Western/ Total Revenue, Total Cost, and Profit Profit = Total revenue - Total cost P = TR - TC

Copyright © 2004 South-Western/ Costs Explicit and Implicit Costs Explicit costs are input costs that require a direct outlay of money by the firm. Implicit costs are input costs that do not require an outlay of money by the firm—they are opportunity costs of being in business, rather than doing something else.

Copyright © 2004 South-Western/ Accounting Profit Accountants measure the accounting profit as the firm’s total revenue minus only the firm’s explicit costs. AP=TR-EC only So…if that is a positive number—accountants say you are making a profit.

Copyright © 2004 South-Western/ Economic Profit Economists measure a firm’s economic profit as total revenue minus total cost, including both explicit and implicit costs. EP=TR-TC (EC + IC) When economic profit is equal to zero, or break-even, the firm is said to be earning a “normal profit” or “zero economic profit.”

Accountants versus Economists Copyright © 2004 South-Western Revenue Total opp costs How an Economist Views a Firm How an Accountant Views a Firm Revenue Economic profit Implicit costs Explicit costs Explicit costs Accounting profit

Copyright © 2004 South-Western/ THE VARIOUS MEASURES OF COST Costs of production may be divided into: fixed costs and variable costs.

Copyright © 2004 South-Western/ Fixed and Variable Costs Fixed costsFixed costs are those costs that DO NOT vary with the quantity of output produced. Variable costsVariable costs are those costs that DO Vary with the quantity of output produced. Practice problems

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.