Chapter 4 Costs of Production TShirts Produced per

  • Slides: 31
Download presentation
Chapter 4 – Costs of Production

Chapter 4 – Costs of Production

T-Shirts Produced per Day 300 250 TP 200 150 100 50 0 1 2

T-Shirts Produced per Day 300 250 TP 200 150 100 50 0 1 2 3 4 5 6 T-Shirts Produced per Day Number of Workers Employed per Day Diminishing returns set in 120 100 80 60 AP 40 20 0 -20 1 2 3 4 5 6 MP Number of Workers Employed per Day

T-Shirts Produced per Day 300 250 TP 200 150 100 50 0 1 2

T-Shirts Produced per Day 300 250 TP 200 150 100 50 0 1 2 3 4 5 6 T-Shirts Produced per Day Number of Workers Employed per Day Diminishing returns set in 120 100 80 60 AP 40 20 0 -20 1 2 3 4 5 6 MP Number of Workers Employed per Day

Labour (L) Total Marginal Fixed Variable Product Costs (MP) (q) (FC) (VC) 0 0

Labour (L) Total Marginal Fixed Variable Product Costs (MP) (q) (FC) (VC) 0 0 1 80 2 200 3 250 4 270 5 280 80 120 50 20 10 Average Marginal Average Cost Fixed Costs Variable (AC) (MC) (AFV) Costs (ΔTC/Δq) (FC/q) (AVC) (AFC + AVC) (VC/q) Total Cost (TC) (FC + VC) $825 $0 $825 140 965 825 300 1125 825 425 1250 825 535 1360 825 640 1465 140 $1. 75 160 1. 33 125 2. 50 110 5. 50 105 10. 50 $10. 31 $1. 75 $12. 06 4. 13 1. 50 5. 63 3. 30 1. 70 5. 00 3. 06 1. 98 5. 04 2. 95 2. 29 5. 24

1. Increasing Returns to Scale (Economies of Scale)

1. Increasing Returns to Scale (Economies of Scale)

2. Constant Returns to Scale

2. Constant Returns to Scale

2. Constant Returns to Scale 3. Decreasing Returns to Scale

2. Constant Returns to Scale 3. Decreasing Returns to Scale

Long-Run Average Costs AC 4 $ per Magazine AC 1 AC 2 Range A

Long-Run Average Costs AC 4 $ per Magazine AC 1 AC 2 Range A AC 3 Range B Quantity of Magazines per Week Range C Long-Run AC

There are some industries that ONE RANGE will DOMINATE the LR average cost Possible

There are some industries that ONE RANGE will DOMINATE the LR average cost Possible Long-Run Average Costs Extended Range of Decrease Returns to Scale Extended Range of Constant Returns to Scale Extended Range of Increasing Returns to Scale Quantity of Output Manufacturing Industry Long-Run AC Quantity of Output Craft Industries $ per Unit Long-Run AC Quantity of Output Primary Industries

Costs Variable costs costs of Fixed costs costsCosts Variable costs costs of Fixed costs costs
PRODUCTION COSTS Definitions Short run costs costs thatPRODUCTION COSTS Definitions Short run costs costs that
COSTS OF PRODUCTION What is Production Production convertingCOSTS OF PRODUCTION What is Production Production converting
The Production Process and Costs Production Analysis ProductionThe Production Process and Costs Production Analysis Production
The Nature of Costs Explicit Costs Accounting CostsThe Nature of Costs Explicit Costs Accounting Costs
Capital Costs Operating maintenance costs life Cycle costsCapital Costs Operating maintenance costs life Cycle costs
Indirect Costs 1 Indirect Costs Defined Indirect costsIndirect Costs 1 Indirect Costs Defined Indirect costs
BUDGETED COSTS Andr Rudder FEES vs COSTS CostsBUDGETED COSTS Andr Rudder FEES vs COSTS Costs
Types of Costs Fixed Costs Variable Costs 1Types of Costs Fixed Costs Variable Costs 1
22 CHAPTER The Costs of Production I COSTs22 CHAPTER The Costs of Production I COSTs
Capitalism Production systems Production systems Production systems ProductionCapitalism Production systems Production systems Production systems Production
3 5 Costs of Production 3 5 Costs3 5 Costs of Production 3 5 Costs
PRODUCTION AND COSTS SAMPLE QUESTIONS ON SHORTTERM COSTSPRODUCTION AND COSTS SAMPLE QUESTIONS ON SHORTTERM COSTS
MBA 201 a Economic Costs Costs of ProductionMBA 201 a Economic Costs Costs of Production
Costs of Production 4 Nov 2010 Costs ofCosts of Production 4 Nov 2010 Costs of
PRODUCTION AND COSTS LONGRUN COSTS AND ECONOMIES OFPRODUCTION AND COSTS LONGRUN COSTS AND ECONOMIES OF
1 5 1 Costs of Production Costs of1 5 1 Costs of Production Costs of
Types of Costs TOTAL COST Material Production costsTypes of Costs TOTAL COST Material Production costs
Soft Costs of Injuries Examples Production Related CostsSoft Costs of Injuries Examples Production Related Costs
The Costs of Production 1 What are CostsThe Costs of Production 1 What are Costs
PRODUCTION AND COSTS LONG RUN COSTS AND ECONOMIESPRODUCTION AND COSTS LONG RUN COSTS AND ECONOMIES
Types of Costs TOTAL COST Material Production costsTypes of Costs TOTAL COST Material Production costs
Costs of Production Identify the various costs ofCosts of Production Identify the various costs of
Production Costs Fixed Variable and Total Costs ToProduction Costs Fixed Variable and Total Costs To