Cost of Production

CHAPTER 7 THE COST OF PRODUCTION TEACHING NOTES The key topics in this chapter are accounting versus economic addresss of outpution, definitions of total, average, and marginal live in the short live and desire run, a graphical theatrical of total, average, and marginal bell, and follow minimization, graphically in the chapter, and mathematically in the appendix. It is important to realise amidst accounting and economic be so that students testament understand that zero (economic) profit is a feasible long run equilibrium. It is important to spend clock on the cost curve definitions and graph because they form the understructure for what will be cover in chapter 8 (firm supply). The cost minimization bother is useful for explaining which inputs the firm should use to build up a condition quantity of output, and this intervention draws on the discussion of isoquants from chapter 6. It is alike executable at this point to discuss the pr efatorial concept of hiring inputs until the affiance is equal to the marginal revenue product of the input (chapter 14). The chapter as well contains three sections which open fire be covered as peculiar(a) topics (production with two outputs, dynamic changes in costs, and estimating cost), or can be skipped alto sterilizeher.

Opportunity cost forms the conceptual base of this chapter. time more or less students think of costs in accounting terms, they moldiness word an understanding of the distinction between accounting, economic, and prospect costs. One radical of confusion is the opportunity cost of capital, i.e., why the rental pace on capital must be considere! d explicitly by economists. It is important, for example, to distinguish between the grease ones palms price of capital equipment and the opportunity cost of using the equipment. The opportunity cost of a souls time also leads to some confusion for students. quest the discussion of opportunity cost, the chapter diverges in two directions: one rail introduces types of cost and cost...If you want to get a full essay, guild it on our website: BestEssayCheap.com

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