![PRODUCTION & COSTS ,[object Object],[object Object],[object Object]](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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- 1. Topic 4 Production and Costs
- 6. Exercise Bill runs a computer shop as a sole proprietorship. The following data are about his financial matters in his first year of business. Calculate Bill's accounting profit and economic profit for his first year of business. Raw materials used 67,000 Salary for an assistant 30,000 Depreciation of the durable assets 14,000 Dividend that he could have earned by investing his $70,000 in shares 4,200 Purchase of durable assets with his own money 70,000 Interest paid to the bank 9,000 Loan from a bank 90,000 Salary that Bill could have earned if he had worked for another firm 65,000 Total revenue 190,000 $
- 10. Wheat production per year from a particular farm (tonnes) Copyright 2001 Pearson Education Australia
- 14. Wheat production per year from a particular farm Tonnes of wheat per year TP Tonnes of wheat per year MP Number of farm workers ( L ) Number of farm workers ( L ) Copyright 2001 Pearson Education Australia
- 15. Wheat production per year from a particular farm Tonnes of wheat per year TPP Tonnes of wheat per year MPP b Diminishing returns set in here Number of farm workers ( L ) Number of farm workers ( L ) b Copyright 2001 Pearson Education Australia
- 16. Wheat production per year from a particular farm Tonnes of wheat per year TP Tonnes of wheat per year MP b d d Number of farm workers ( L ) Number of farm workers ( L ) Maximum output b Copyright 2001 Pearson Education Australia
- 18. To practice what we’ve done so far…
- 20. Short-run Costs Quantity Costs (dollars) TC Total Cost Fixed Cost TVC Variable Cost TFC
- 23. Cost Relationships Relationship b/w TVC, TFC & TC MC cuts both AVC & ATC at their minimum points AFC is decreasing
- 27. Economies of Scale Output O Costs ($) (a) Economies of scale LRAC Copyright 2001 Pearson Education Australia
- 29. Diseconomies of Scale Output O Costs (b) Diseconomies of scale LRAC Copyright 2001 Pearson Education Australia
- 30. Constant Return to scales Output O Costs (c) Constant costs LRAC Copyright 2001 Pearson Education Australia
- 31. A typical long-run average cost curve Output O Costs LRAC Economies of scale Constant Return to scale Diseconomies of scale Copyright 2001 Pearson Education Australia q1 q2
- 33. A typical long-run average cost curve Output O Costs LRAC Economies of scale Constant Return to scale Diseconomies of scale Copyright 2001 Pearson Education Australia q1 q2 MES
- 34. Constructing long-run average cost curves: factories of fixed size SRAC 1 Costs Output O 1 factory Copyright 2001 Pearson Education Australia
- 35. Constructing long-run average cost curves: factories of fixed size SRAC 1 SRAC 2 Costs Output O 2 factories Copyright 2001 Pearson Education Australia
- 36. Constructing long-run average cost curves: factories of fixed size SRAC 1 SRAC 3 SRAC 2 Costs Output O 3 factories Copyright 2001 Pearson Education Australia
- 37. Constructing long-run average cost curves: factories of fixed size SRAC 1 SRAC 3 SRAC 2 SRAC 4 SRAC 5 Costs Output O 5 factories 4 factories Copyright 2001 Pearson Education Australia
- 38. Constructing long-run average cost curves: factories of fixed size SRAC 1 SRAC 3 SRAC 2 SRAC 4 SRAC 5 LRAC Costs Output O Copyright 2001 Pearson Education Australia
- 39. Assuming a virtually unlimited number of plant sizes, LRAC curve takes on a smoother shape LRAC Costs Output O Copyright 2001 Pearson Education Australia