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Lecture Macroeconomics (20/e): Chapter 9 - McConnell, Brue, Flynn
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Lecture Macroeconomics (20/e): Chapter 9 - McConnell, Brue, Flynn
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Chapter 9 - Businesses and the cost of production. This chapter develops a number of crucial cost concepts that will be employed in the succeeding three chapters to analyze the four basic market models. A firm’s implicit and explicit costs are explained for both short and long run periods. The explanation of short run costs includes arithmetic and graphic analyses of both the total, average, and marginal-cost concepts. | Chapter 9 Businesses and the Cost of Production Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This chapter develops a number of crucial cost concepts that will be employed in the succeeding three chapters to analyze the four basic market models. A firm’s implicit and explicit costs are explained for both short and long run periods. The explanation of short run costs includes arithmetic and graphic analyses of both the total, average, and marginal-cost concepts. These concepts prepare students for both the total-revenue minus total-cost and marginal-revenue = marginal-cost approaches to profit maximization, which are presented in the next few chapters. The law of diminishing returns is explained as an essential concept for understanding average and marginal cost curves. The general shape of each cost curve and the relationship they bear to one another are analyzed with special . | Chapter 9 Businesses and the Cost of Production Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. This chapter develops a number of crucial cost concepts that will be employed in the succeeding three chapters to analyze the four basic market models. A firm’s implicit and explicit costs are explained for both short and long run periods. The explanation of short run costs includes arithmetic and graphic analyses of both the total, average, and marginal-cost concepts. These concepts prepare students for both the total-revenue minus total-cost and marginal-revenue = marginal-cost approaches to profit maximization, which are presented in the next few chapters. The law of diminishing returns is explained as an essential concept for understanding average and marginal cost curves. The general shape of each cost curve and the relationship they bear to one another are analyzed with special care. The final part of the chapter develops the long run average cost curve and analyzes the characteristics and factors involved in economies and diseconomies of scale. In the Last Word, there is a discussion about 3-D printers, a new technology that may revolutionize manufacturing. Economic Costs The payment that must be made to obtain and retain the services of a resource Explicit costs Monetary outlay Implicit costs Opportunity cost of using self-owned resources Value of next-best use Includes a normal profit LO1 Economic costs are the payments a firm must make, or incomes it must provide, to resource suppliers to attract those resources away from their best alternative production opportunities. Payments may be explicit or implicit. (Recall the opportunity-cost concept) Explicit costs are payments to non-owners for resources they supply. In the textbook’s T-shirt example, this would include the cost of the T-shirts, clerk’s salary, and utilities, for a total of $63,000. Implicit
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