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Economic vs. Accounting Cost Short-Run vs. Long-Run Decisions Opportunity Cost 8 Behind the Supply Curve: Inputs and Costs
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Total Product Curve Number of Workers Output per minute 246810 50 100 150 200 250 300 350 400 Increasing productivity: specialization Decreasing productivity: diminishing returns
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1234567 No. of workers Marginal Product 10 20 30 40 50 60 70 80 90 1 2 3 0 4 0 65 150 220 270 Total Product Marginal Product 5295 Marginal Product Curve
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0 65 150 220 270 Output 0 1 2 3 4 Labor $15 Fixed Cost Ingred Cost Labor Cost 2955$15 Total Cost Total Cost Curve 2¢/cookie $7/hour
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0 65 150 220 270 Output 295 Total Cost $15.00 $23.30 $32.00 $40.40 $48.40 $55.90 Number of cookies Cost ($) 80160240320400 10 20 30 40 50 60 70 80 Total Cost Curve
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Number of cookies Cost ($) 80160240320400 10 20 30 40 50 60 70 80 Short-Run Total Cost Curve Diminishing returns: costs increase more rapidly Fixed cost Variable cost Total cost
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Output Cost ($) 246810 20 40 60 80 100 120 140 160 Total cost Calculating Average (AC) & Marginal (MC) Cost 44 48 84 101 2 Units MC = AC = 8 Units MC = AC =
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0 65 150 220 270 OutputATCAVCMC 295 Total Cost $15.00 $23.30 $32.00 $40.40 $48.40 $55.90 Marginal and Average Costs
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Cookies Aver / Marg Cost ($) 80160240320400.10.12.14.16.18.20.22.24.26.28.30 Marginal and Average Cost Curves
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160320480640800960.10.20.30.40 ATC (2 ovens) ATC (4 ovens) ATC (6 ovens) ATC (8 ovens) Short-run and Long-run Average Costs In the long run, the firm can adjust capacity.
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Output Cost ($) 48121620 5 10 15 20 25 30 35 40 Short-run and Long-run Average Costs Indivisible inputs: minimum level of fixed costs. Economies of scale specialization indivisible inputs more productive equip. buying power Minimum efficient scale
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Long-Run Cost Curves: Military Hospitals
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Pharmacy47% Anesthesiology14% Pathology14% Radiology10% Intensive Care6%
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