Production and Cost ECONOMICS Principles and Applications 3

  • Slides: 19
Download presentation
Production and Cost ECONOMICS: Principles and Applications 3 e HALL & LIEBERMAN © 2005

Production and Cost ECONOMICS: Principles and Applications 3 e HALL & LIEBERMAN © 2005 Thomson Business and Professional Publishing

Figure 1 The Firm and Its Environment

Figure 1 The Firm and Its Environment

Figure 2 Forms of Business Organization Percent of Firms Percent of Total Sales Corporations

Figure 2 Forms of Business Organization Percent of Firms Percent of Total Sales Corporations 20% Partnerships 7% Corporations 90% Sole Proprietorships 73% Partnerships 4% Sole Proprietorships 6%

Figure 3 The Firm’s Production Function

Figure 3 The Firm’s Production Function

Table 1 Short-Run Production at Spotless Car Wash

Table 1 Short-Run Production at Spotless Car Wash

Figure 4 Total And Marginal Product Units of Output Total Product 196 184 161

Figure 4 Total And Marginal Product Units of Output Total Product 196 184 161 DQ from hiring fourth worker 130 DQ from hiring third worker 90 DQ from hiring second worker 30 DQ from hiring first worker 1 increasing marginal returns 2 3 4 5 diminishing marginal returns 6 Number of Workers

Table 2 A Firm’s Costs

Table 2 A Firm’s Costs

Table 3 Short-Run Costs for Spotless Car Wash

Table 3 Short-Run Costs for Spotless Car Wash

Figure 5 The Firm’s Total Cost Curves Dollars TC $435 375 TVC TFC 315

Figure 5 The Firm’s Total Cost Curves Dollars TC $435 375 TVC TFC 315 255 195 135 TFC 0 30 90 130 161 184 196 Units of Output

Figure 6 Average and Marginal Costs Dollars MC $4 3 AFC ATC AVC 2

Figure 6 Average and Marginal Costs Dollars MC $4 3 AFC ATC AVC 2 1 0 30 90 130 161 196 Units of Output

Table 4 Average and Marginal Test Scores

Table 4 Average and Marginal Test Scores

Table 5 Four Ways to Wash 196 Cars per Day

Table 5 Four Ways to Wash 196 Cars per Day

Table 6 Long-Run Costs for Spotless Car Wash

Table 6 Long-Run Costs for Spotless Car Wash

Figure 7 Long-Run Average Total Cost Dollars $4. 00 ATC 1 ATC 0 ATC

Figure 7 Long-Run Average Total Cost Dollars $4. 00 ATC 1 ATC 0 ATC 2 3. 00 C D B A 2. 00 LRATC 3 E 1. 00 0 30 Use 0 automated lines 90 130 161 184 175 196 Use 1 automated lines 250 Use 2 automated lines 300 Use 3 automated lines Units of Output

Figure 8 The Shape of LRATC Dollars $4. 00 3. 00 LRATC 2. 00

Figure 8 The Shape of LRATC Dollars $4. 00 3. 00 LRATC 2. 00 130 0 Economies of Scale 184 Constant Returns to Scale Diseconomies of Scale Units of Output

Figure 9 How LRATC Helps Explain Market Structure (a) A Market with Many Small

Figure 9 How LRATC Helps Explain Market Structure (a) A Market with Many Small Firms LRATCTypical Firm Dollars F $160 E 80 DMarket 0 1, 000 3, 000 100, 000 Units per Month

Figure 9 How LRATC Helps Explain Market Structure LRATCTypical Firm (b) A Natural Monopoly

Figure 9 How LRATC Helps Explain Market Structure LRATCTypical Firm (b) A Natural Monopoly Dollars $160 80 DMarket 0 100, 000 Units per Month

Figure 9 How LRATC Helps Explain Market Structure (c) A Market with a Few

Figure 9 How LRATC Helps Explain Market Structure (c) A Market with a Few Large Firms Dollars LRATCTypical Firm H $200 F E 80 DMarket 0 25, 000 100, 000 Units per Month

Figure 9 How LRATC Helps Explain Market Structure (d) A Market with Coexisting Small

Figure 9 How LRATC Helps Explain Market Structure (d) A Market with Coexisting Small and Large Firms LRATCTypical Firm Dollars $160 E F 80 DMarket 0 1, 000 100, 000 Units per Month