Presentation is loading. Please wait.

Presentation is loading. Please wait.

Micro Economics in a Global Economy

Published byAubrey Chase Modified over 6 years ago

Similar presentations

Presentation on theme: "Micro Economics in a Global Economy"— Presentation transcript:

1 Micro Economics in a Global Economy
Chapter 7 Cost Theory and Estimation PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

2 The Nature of Costs Explicit Costs Economic Costs Relevant Costs
Accounting Costs Economic Costs Implicit Costs Alternative or Opportunity Costs Relevant Costs Incremental Costs Sunk Costs are Irrelevant PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

3 Short-Run Cost Functions
Total Cost = TC = f(Q) Total Fixed Cost = TFC Total Variable Cost = TVC TC = TFC + TVC PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

4 Short-Run Cost Functions
Average Total Cost = ATC = TC/Q Average Fixed Cost = AFC = TFC/Q Average Variable Cost = AVC = TVC/Q ATC = AFC + AVC Marginal Cost = TC/Q = TVC/Q PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

5 Short-Run Cost Functions
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

6 PowerPoint Slides by Robert F. Brooker. Harcourt, Inc
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

7 Short-Run Cost Functions
Average Variable Cost AVC = TVC/Q = w/APL Marginal Cost TC/Q = TVC/Q = w/MPL PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

8 Long-Run Cost Curves Long-Run Total Cost = LTC = f(Q)
Long-Run Average Cost = LAC = LTC/Q Long-Run Marginal Cost = LMC = LTC/Q PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

9 Derivation of Long-Run Cost Curves
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

10 Relationship Between Long-Run and Short-Run Average Cost Curves
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

11 Possible Shapes of the LAC Curve
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

12 Learning Curves Average Cost of Unit Q = C = aQb
Estimation Form: log C = log a + b Log Q PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

13 Minimizing Costs Internationally
Foreign Sourcing of Inputs New International Economies of Scale Immigration of Skilled Labor Brain Drain PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

14 Architecture of Ideal Firm
Core Competencies Outsourcing of Non-Core Tasks Learning Organization Efficiency and Flexibility Location Near Markets Agility in Responding to Market Forces PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

15 Cost-Volume-Profit Analysis
Total Revenue = TR = (P)(Q) Total Cost = TC = TFC + (AVC)(Q) Breakeven Volume TR = TC (P)(Q) = TFC + (AVC)(Q) QBE = TFC/(P - AVC) PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

16 Cost-Volume-Profit Analysis
TFC = 200 AVC = 5 QBE = 40 PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

17 Operating Leverage Operating Leverage = TFC/TVC
Degree of Operating Leverage = DOL PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

18 Operating Leverage TC’ has a higher DOL than TC and therefore a higher QBE PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

19 Empirical Estimation Data Collection Issues
Opportunity Costs Must be Extracted from Accounting Cost Data Costs Must be Apportioned Among Products Costs Must be Matched to Output Over Time Costs Must be Corrected for Inflation PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

20 Functional Form for Short-Run Cost Functions
Empirical Estimation Functional Form for Short-Run Cost Functions Theoretical Form Linear Approximation PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

21 Empirical Estimation Theoretical Form Linear Approximation
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

22 Empirical Estimation Long-Run Cost Curves
Cross-Sectional Regression Analysis Engineering Method Survival Technique PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

23 Empirical Estimation Actual LAC versus empirically estimated LAC’
PowerPoint Slides by Robert F. Brooker Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.

Download ppt "Micro Economics in a Global Economy"

Similar presentations

PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. The Nature of Costs Explicit Costs –Accounting Costs Economic.

PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. The Nature of Costs Explicit Costs –Accounting Costs Economic.
PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Short-Run Cost Functions Total Cost = TC = f(Q) Total Fixed.

PowerPoint Slides by Robert F. BrookerCopyright (c) 2001 by Harcourt, Inc. All rights reserved. Short-Run Cost Functions Total Cost = TC = f(Q) Total Fixed.
Explicit Costs Economic Costs Relevant Costs Accounting Costs

Explicit Costs Economic Costs Relevant Costs Accounting Costs
Cost Theory and Estimation

Cost Theory and Estimation
Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.Slide 1 Managerial Economics.

Prepared by Robert F. Brooker, Ph.D. Copyright ©2004 by South-Western, a division of Thomson Learning. All rights reserved.Slide 1 Managerial Economics.
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Explaining Supply: The Costs of Production Law of Supply u Firms are willing.

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Explaining Supply: The Costs of Production Law of Supply u Firms are willing.
The Costs of Production   Outline: – –Study how firm’s decisions regarding prices and quantities depend on the market conditions they face – –Firm’s.

The Costs of Production   Outline: – –Study how firm’s decisions regarding prices and quantities depend on the market conditions they face – –Firm’s.
The Costs of Production Chapter 13 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work.

The Costs of Production Chapter 13 Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work.
1 Short-Run Costs and Output Decisions. 2 Decisions Facing Firms DECISIONS are based on INFORMATION How much of each input to demand 3. Which production.

1 Short-Run Costs and Output Decisions. 2 Decisions Facing Firms DECISIONS are based on INFORMATION How much of each input to demand 3. Which production.
1 Chapter 8 Costs of Production Costs of Production Principles of Economics by Fred M Gottheil PowerPoint Slides prepared by Ken Long © ©1999 South-Western.

1 Chapter 8 Costs of Production Costs of Production Principles of Economics by Fred M Gottheil PowerPoint Slides prepared by Ken Long © ©1999 South-Western.
9 - 1 Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.

9 - 1 Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.
MANAGERIAL ECONOMICS 11th Edition

MANAGERIAL ECONOMICS 11th Edition
Cost Analysis and Estimation

Cost Analysis and Estimation
7 Prepared by: Fernando Quijano and Yvonn Quijano © 2004 Prentice Hall Business PublishingPrinciples of Economics, 7/eKarl Case, Ray Fair Short-Run Costs.

7 Prepared by: Fernando Quijano and Yvonn Quijano © 2004 Prentice Hall Business PublishingPrinciples of Economics, 7/eKarl Case, Ray Fair Short-Run Costs.
PowerPoint Slides by Robert F. BrookerHarcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Managerial Economics in a Global Economy.

PowerPoint Slides by Robert F. BrookerHarcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Managerial Economics in a Global Economy.
The Costs of Production Chapter 8 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

The Costs of Production Chapter 8 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Businesses and the Costs of Production 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Businesses and the Costs of Production 10 McGraw-Hill/IrwinCopyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
The Costs of Production Chp: 8 Lecture: 15 & 16. Economic Costs  Equal to opportunity costs  Explicit + implicit costs  Explicit costs  Monetary payments.

The Costs of Production Chp: 8 Lecture: 15 & 16. Economic Costs  Equal to opportunity costs  Explicit + implicit costs  Explicit costs  Monetary payments.
The Nature of Costs Explicit Costs Accounting Costs Economic Costs Implicit Costs Alternative or Opportunity Costs Relevant Costs Incremental Costs Sunk.

The Nature of Costs Explicit Costs Accounting Costs Economic Costs Implicit Costs Alternative or Opportunity Costs Relevant Costs Incremental Costs Sunk.
22 - 1 Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.

Copyright McGraw-Hill/Irwin, 2005 Economic Costs Short-Run and Long-Run Short-Run Production Relationships Short-Run Production Costs Short-Run.

Similar presentations

Ads by Google