TheCostofProduction文件材料教学稿件.ppt

Chapter 7;Topics to be Discussed;An Example A firm owns its own building and pays no rent for office space Does this mean the cost of office space is zero?;Sunk Cost Expenditure that has been made and cannot be recovered Should not influence a firm’s decisions.;Total output is a function of variable inputs and fixed inputs. Therefore, the total cost of production equals the fixed cost (the cost of the fixed inputs) plus the variable cost (the cost of the variable inputs), or…;Fixed Cost Does not vary with the level of output Variable Cost Cost that varies as output varies;Fixed Cost Cost paid by a firm that is in business regardless of the level of output Sunk Cost Cost that have been incurred and cannot be recovered;Personal Computers: most costs are variable Components, labor Software: most costs are sunk Cost of developing the software;Pizza Largest cost component is fixed;Cost in the Short Run;Cost in the Short Run;Cost in the Short Run;Cost in the Short Run;Chapter 1*;Cost in the Short Run;A Firm’s Short-Run Costs ($);Cost Curves for a Firm;Cost Curves for a Firm;Cost Curves for a Firm;Cost Curves for a Firm;Cost Curves for a Firm;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Cost in the Long Run;Choosing Inputs ;Producing a GivenOutput at Minimum Cost;Input Substitution When an Input Price Change;Cost in the Long Run;Cost in the Long Run;Cost minimization with Varying Output Levels A firm’s expansion path shows the minimum cost combinations of labor and capital at each level of output.;A Firm’s Expansion Path;A Firm’s Long-Run Total Cost Curve;Long-Run VersusShort-Run Cost Curves;Long-Run Expansion Path;Long-Run Average Cost (LAC) Constant Returns to Scale If input is doubled, output will double and average cost is constant at all levels of output.;Long-Run Average Cost (LAC) Increasing Returns to Scale If input is doubled, output will more than double a