11/22 Warm-Ups 1. When a company trains or educates its workers, it is investing in ________ capital. 2. What do you call the graph that shows the production alternatives for an economy/business?

11/23 Warm-Up 1. Write a scenario where you might see the Law of Diminishing Marginal Returns.

Quiz Bonus Answer on the back of your quiz for 2 pts bonus. Draw a production possibilities curve showing guns and butter. (Make up numbers for your graph). To get the points, the X and Y axis must be properly labeled.

Intro to Economics Quiz  After your quiz, work on your homework- 19.2, p 213

Scenarios on p. 208  Correct your answers as needed as we go over the answers to the scenarios on p Just for fun: The richest guy in the world The richest guy in the world

Costs of Production p. 209 Objective: Distinguish between various costs of production through notes and scenarios

Review ….  Remember……  Scarcity forces people to make decisions about how they will use their resources!!!  **Economic decision making requires people to consider all the costs and benefits of a decision  What are trade-offs??? What is an opportunity cost???

Costs of Production  Fixed Costs –Costs or expenses that are the same no matter how many units of a good are produced –Ex: mortgage payments, rent

Costs of Production  Variable Costs –Costs or expenses that change with the number of products produced –Ex: wages, raw materials, electricity bills, water bills –These costs increase when production increases and decrease when production decreases

Costs of Production  Total Costs –Fixed Costs + Variable Costs= Total Costs TC = FC + VC

Costs of Production  Marginal Costs –The extra or additional cost of producing one additional unit of an output –Ex: 30 iPods= $1500 –31 iPods= $1550  marginal cost= $50

Costs of Production Add: Revenue is the money received for goods/services  Marginal Revenue –the extra revenue that results from selling one more unit of an output

Costs of Production  Cost-Benefit Analysis –an economic decision making technique that tells us to choose an action or make a decision when the benefits are greater than the costs

Fixed and Variable Costs Fixed and Variable Costs video Fixed and Variable Costs video

Law of Diminishing Marginal Returns  Law of Diminishing Marginal Returns –a company’s goal is to make as much profit as possible –Profit: is money a company has made after costs have been deducted. Add: Profit = Revunue - Costs –Companies can increase profit by maximizing efficiency in production. –Often, by adding more land, labor, or capital, companies can increase their profit.

Law of Diminishing Marginal Returns  Law of Diminishing Marginal Returns: a level of production in which the marginal product of labor decreases as you increase ONE factor of production (and all other factors of production remain constant)

Law of Diminishing Marginal Returns Marginal Product of Labor (Chair production per hour) Labor (Number of Workers) At what point should this chair company stop hiring additional workers?

Law of Diminishing Marginal Returns Marginal Product of Labor (Chair production per hour) Labor (Number of Workers) At 6 workers the company is MOST PRODUCTIVE! The company should not hire the 7 th worker.

Other Terms to Know  - Capital Goods: raw materials that are used to make goods and services  - Consumer Goods: goods bought in the market. These goods are consumed and are not used to produce more goods.  **As the cost of capital goods rises, the price of producing consumer goods also rises.

Classwork Assignment  P. 212  Scenarios 1 and 2 in class p. 211