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11.2 Theory of Costs 11.3 Economic Costs 11.4 Short Run Cost Curves 11.4.1 Total, Fixed and Variable Costs 11.4.2 Marginal Cost 11.4.3 Cost Schedule 11.4.4 Total, Fixed and Variable Cost Curves 11.4.5 Average, Total, Average Fixed, Average Variable Cost Curves and Marginal Cost Curve 11.4.6 Shape of Average Variable Cost Curve
A basic cost-volume-profit chart composed of a firm’s total cost and total revenue curves is depicted in Figure 3.4. Volume of output is measured on the horizontal axis; revenue and cost are shown on the vertical axis. Fixed costs are constant regardless of the output produced and are indicated by horizontal line. Variable costs at each
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few example of the explicit cost. The explicit cost is also known as out-pocket cost. This cost is handy in calculating both accounting and economic profit. Implicit cost- The implicit cost is directly opposite to it, as it is the cost that is not directly incurred by the firm or company. In implicit cost outflow of cash doesn’t take place.
The Long-Run Average Cost Curve as an Envelope Curve EXAMPLE 8.5 The Short-Run and Long-Run Cost Curves for an American Railroad Firm 8.4 SPECIAL TOPICS IN COST Economies of Scope EXAMPLE 8.6 Nike Enters the Market for Sports Equipment Economies of Experience: The Experience Curve EXAMPLE 8.7 The Experience Curve in the Production of EPROM Chips
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be at a cost-minimizing point. Second, the cost function must be concave in prices, note that this a general result and does not depend on any special properties of the production function. Third, imagine that you are employing a thousand hours of labor at the cost-minimizing point: by how much would your firm’s costs increase if there was in
Cost Curves For any output level q, the long-run total cost curve always gives the lowest possible total production cost. Therefore, the long-run av. total cost curve must always give the lowest possible av. total production cost. The long-run av. total cost curve must be the lower envelope of all of the
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total product curves, total cost curves, marginal cost curves, and the long-run average cost curve. After reading and reviewing this chapter, you should be able to: 1. Understand the economist’s notion of production. 2. Define the difference between economic and accounting costs. 3. Distinguish between private and external costs. 4.
