Rural families in less developed countries don't have access to safe water.
The alternative approach developed by the byrraju Foundation exploits economies of scale.
The long-run marginal-cost and profit can be drawn.
Examples of production costs can be found on the page Short-Run Costs.
MyLab Economics can help you study more efficiently.
A firm's production cost is determined by its production technology, which combines capital, labor, and materials to produce output.
We look at the cost curves of several products, including aluminum, hospital services, wind power, truck freight, and airplanes, after we explain the link between technology and costs.
The long run and the short run are considered by economists.
The long run is enough for a firm to be flexible in its choice of inputs.
It is operating in the short run when a firm cannot modify its facility.
We look at both short-run and long-run costs in this chapter.
We show how firms use short-run and long-run cost curves to make decisions about whether to enter a market and how much output to produce.
Firms make decisions in this first chapter.
A firm's goal is to make money.
A firm's total revenue is the money it gets from selling its product.
The price per unit of output times the quantity sold is called the price per unit of output.
The cost of production is explored in this chapter.
The opportu cost of the inputs used in the production process is equal to the cost of all the inputs used in the production process.
The first principle of economics is important.
The sacrifice you make to get something is the opportunity cost.
To calculate a firm's economic cost, we need to know what the firm sacrifice to use inputs.
Opportunity cost is the economic cost.
If a firm spends $10,000 per month on labor, capital, and materials, its explicit cost is $10,000.
An opportunity cost is the cost of inputs that do not require a payment.
There are two payments.
The opportunity cost of the time spent running the firm is $5,000 per month, if anentrepreneur could earn $5,000 per month in another job.
Entrepreneurs use their own funds to set up their businesses.
The opportunity cost is the interest income the funds could have earned in the bank if the business was started with $200,000 withdrawn from a savings account.
Participation in the sharing economy is an attractive way to earn an income for many workers.
The opportunity cost of time diverted from working at a regular job is included in the cost of driving.
If a regular job pays a salary of $3,000 per month, that's only part of the opportunity cost.
Many regular jobs have fringe benefits such as paid sick leave, vacation days, and subsidized health insurance.
Workers who switch from a regular job to ride-sharing service ride-sharing service ride-sharing service ride-sharing service ride-sharing service sacrifice more than the $3,000 salary Exercise 1.8 is related to it.
The firm's economic cost is $17,000, equal to $10,000 in explicit cost and $7,000 in implicit cost.
There is a different approach to computing costs by accountants.
The accounting cost is the amount of money spent on labor, capital, and materials.
The firm has a fixed production facility.
Draw the short-run marginal-cost and average-cost curves.
Workers use molds to make paddles in a workshop.
Information about the nature of the production process is needed before we can discuss the cost of production.
A single worker in the workshop is making a paddle.
The quantity produced to five paddles per day is increased by a second worker.
The total-product curve shows the relationship between the quantity of labor and the amount of output.
The output of the first two workers increases at an increasing rate.
Diminishing returns can cause output to increase at a decreasing rate.
Workers can specialize in production tasks when a firm increases its workforce.
Worker productivity increases because of the benefits of continuity.
Each worker becomes more proficient at an assigned task by repetition.
If output is produced with two or more inputs, we increase one input while holding the other inputs fixed.
At a decreasing rate, output will increase.
The second worker added four paddles to the total output, while the third worker added three.
The marginal product drops to two paddles for the fourth worker and one paddle for the fifth worker as the firm continues to hire more workers.
As the number of workers increases, the workers will spend more time waiting to use the mold.
The total-product curve shows the effects of labor specialization on the quantity of labor and the amount of returns.
Because of dimin ishing returns, the total output increases at a decreasing rate.
We're ready to show the relationship between output and production cost because we've seen the relationship between labor input and output.
You can hire workers for your workshop at the market wage of $50 per day if the opportunity cost of your time is $50 per day.
The building and the paddle mold can be purchased for $365,000.
The opportunity cost of tying up your $365,000 in the workshop is $36,500 per year, or $100 per day, if the interest rate on that money is 10 percent per year.
Fixed cost and variable cost are the two types of production costs.
The cost is the same with the quantity building and mold.
The fixed was shown in the third column.
The daily variable cost is 50 times the number of workers that are produced.
The variable cost is $50 for one worker, $100 for two workers, and so on.
The firm's total cost is calculated by adding the fixed and variable costs.
The cost for different quantities of output is shown in the fifth column.
One worker makes one paddle at a total cost of $150, which is equal to the fixed cost of $100 and the variable cost of $50.
A second worker increases output to five paddles and increases total cost to $200, equal to $100 in fixed cost and $100 in variable cost.
The total cost goes up to $250 for 8 units of output, $300 for 10 units, and so on.
The short-run cost curves correspond to columns 3, 4, and 5 of Table 23.2.
The fixed cost is shown in the horizontal line on the graph.
The distance is the same at all levels of output.
The short-run total-cost curve shows the relationship between the quantity of output and production costs.
There are three different types of cost.
The number in column 3 is divided by the number in column 2.
The average fixed cost is $100/1 if the output in the second row is one paddle.
The average fixed cost is $20 in the third row.
The average variable cost is the same as the variable cost.
The output in the third row is five paddles and the variable cost is $100, so the average variable cost is $20
The amount of labor required per unit of output is pushed down by 2:51 PM.
The average variable cost increases when output increases because of diminishing returns.
Adding workers to a large workforce can make workers less productive.
The fixed cost is spread.
The average variable cost increases as the firm increases output beyond that point.
The tug-of-war is won by the spread of the fixed cost because it is not very strong yet.
The tug-of-war is won by diminishing returns and rising average variable cost.
The increase in total cost is the result of a one-unit increase in output.
When the firm produces the first paddle, the marginal cost increases.
The firm hires a single worker for $50 to produce the first unit.
The marginal cost of the first paddle is $50.
The second worker will increase output to five paddles.
As output increases, the marginal cost decreases.
Adding a second worker increases output by four paddles.
Each of the four extra paddles will cost $12.50 if the second worker is added.
specialization leads to increased marginal productivity.
specialization leads to decreasing marginal cost.
Dimin ishing returns result in the positively sloped portion of the marginal-cost curve.
The cost of hiring the third worker is $50, which equates to $16.67 for each of the three extra paddles produced.
Marginal cost increases as output increases.
The marginal cost increases to $25 for between 8 and 10 paddles, then increases to $50 for between 10 and 11 paddles, and so on.
Labor productivity is decreased by diminishing returns.
There is a relationship between short-run marginal cost and short-run average total cost.
The average cost is falling when the marginal cost is less than the average cost.
The average cost is rising when the marginal cost exceeds the average cost.
The marginal-cost curve intersects the short-run average total cost curve at its minimum point.
Simple logic can be used to explain the relationship between average and marginal cost.
You should start the semester with nine completed courses and a cumulative grade-point average of 3.0.
In the first row of Table 23.3, you have 27 grade points (4 points for each A, 3 points for each B, and so on), which is 27 points divided by 9 courses.
This semester, you enroll in a history course.
Your marginal grade in the history course will affect your new grade point average.
If you get a D in history, your grade point total will increase from 27 points to 28 points.
Your new grade point average is 2.80 if you divide the new total by 10 courses.
The old average grade of 3.0 is less than your marginal grade of 1.0.
The average grade is equal to the marginal grade.
If you get a B in history, your grade point total increases from 27 points to 30 points.
Your new grade point average is 3.0, if you divide the new total by 10 courses.
The old average grade of 3.0 has not changed because of your marginal grade of 3.0.
In the fourth row of Table 23.3, if you get an A in history, your grade point total increases from 27 points to 31 points, so your new grade point average is 3.10 The old average grade of 3.0 was greater than the marginal grade of 4.0.
The age will fall if the marginal grade is less than the average grade, if the marginal grade exceeds the average grade, and if the marginal grade equals the average grade.
The quantity produced in early 2015 is 75 million barrels per day, and the marginal cost starts to increase rapidly to around $80 per barrel.
The cost of oil from different sources is reflected in the marginal cost curve.
The marginal cost is low for nations in the Middle East and Russia at the low end of the cost curve.
The marginal cost for oil from the North Sea, oil sands projects in Canada, and conventional sources in the U.S. are higher in the intermediate range.
Exercise 2.8 is related to it.
We've been exploring short-run cost curves, which show the cost of average cost curves.
The long-run cost curves show production costs in different facilities.
A firm can build a new production facility in the long run.
Modification of an existing facility is an option in the long run.
There are no diminishing returns in the long run compared to the short run.
The larger the number of workers in the facility, the smaller the share of the facility available for each worker.
There are no dimin ishing returns if a firm expands its production facility as its workforce grows.
If you have decided to replace your existing workshop with a new one, you can use the example of paddle production.
You have been making 10 paddles per day for an average cost of $30 per paddle.
M23_OSUL5592_09_GE_C23.indd 526 3/16/17 at 2:51 PM, when sponsors of rafting adventures order new paddles, you decide to produce twice as much in your new facility.
It is possible to double the original operation.
You could build two identical workshops and hire two identical workforces.
When a firm chooses its inputs, the total cost of production.
The table is flexible in choosing its inputs.
The long-run average cost doesn't change because of doubling produced, even though the long-run cost is divided by the quantity from 10 to 20 paddles.
The production costs of a third work shop will increase from $600 to $900.
The average cost is constant because the long-run total cost increases proportionately with the quantity produced.
There are constant returns for output levels of 10 or more paddles.
If a firm wants to double its output in the long run, replica tion is an option.
A firm can double its output and costs by replicating an existing operation.
A single larger workshop that can produce twice as much output at a lower cost is another possibility.
The long-run average cost of producing 20 or 30 paddles is less than $30 per paddle.
There is a change in long-run cost when one more unit of output is produced.
A one-unit increase in output is perfectly flexible for the firm.
It's tempting to think that your costs would be cut in half, but that's not the case.
You can make 10 paddles per day with a single mold.
Capital costs won't be cut in half if you cut your output in half.
You would still need the same floor space if each mold requires a fixed amount.
It wouldn't decrease the cost of your production facility if you cut output in half.
The workspace and mold would cost you $100 a day.
The average cost for producing 5 paddles will be more than the average cost for 10 paddles because cutting output in half doesn't cut capital costs in half.
An input that can't be scaled down to produce a smaller amount of output.
When a production process requires a smaller amount of output.
Some indivisible inputs are used in most pro duction operations.
A railroad company uses tracks to provide freight service between two cities.
A single rail is not enough for the company to scale down.
A shipping firm uses a large ship to carry TV sets from Japan to the United States.
The company can't scale back by taking TVs in rowboats.