微观经济学英文课件chapter_7The Cost of Production.ppt

Chapter 1 Chapter 7 The Cost of Production Topics to be Discussed Measuring Cost: Which Costs Matter? Cost in the Short Run Cost in the Long Run Long-Run Versus Short-Run Cost Curves Topics to be Discussed Production with Two Outputs--Economies of Scope Dynamic Changes in Costs--The Learning Curve Estimating and Predicting Cost Introduction The production technology measures the relationship between input and output. Given the production technology, managers must choose how to produce. Introduction To determine the optimal level of output and the input combinations, we must convert from the unit measurements of the production technology to dollar measurements or costs. Measuring Cost:Which Costs Matter? Accounting Cost Actual expenses plus depreciation charges for capital equipment Economic Cost Cost to a firm of utilizing economic resources in production, including opportunity cost Measuring Cost:Which Costs Matter? Opportunity cost. Cost associated with opportunities that are foregone when a firm’s resources are not put to their highest-value use. Measuring Cost:Which Costs Matter? An Example A firm owns its own building and pays no rent for office space Does this mean the cost of office space is zero? Measuring Cost:Which Costs Matter? Sunk Cost Expenditure that has been made and cannot be recovered Should not influence a firm’s decisions. Measuring Cost:Which Costs Matter? An Example A firm pays $500,000 for an option to buy a building. The cost of the building is $5 million or a total of $5.5 million. The firm finds another building for $5.25 million. Which building should the firm buy? Choosing the Locationfor a New Law School Building Northwestern University Law School 1) Current location in downtown Chicago 2) Alternative location in Evanston with the main campus Choosing the Locationfor a New Law School Building Northwestern University Law School 3) Choosing a Site Land owned in Chicago Must purchase land in Evanston Chicago location might a