The Firm and CostOverheads.ppt

1、The Firm and Cost Overheads,Costs in the short run,Total cost, everything they must give upin order to produce output,A firms total cost of production is the opportunity cost of the owners,Explicit and implicit costs,Explicit costs,1. purchase of expendable inputs including labor time,2. purchase of

2、 capital services (usually rent or lease),Implicit costs,1. value of produced expendables(feed for a cattle producer),2. value of services provided by owned capitalincluding financial capital,Operating costs and allocated overhead,1. Costs of all expendables are often allocatedto the generic group O

3、PERATING COSTS,2. All other costs are allocated to the groupALLOCATED OVERHEAD,Data for the hay hauling problem,Cost of labor per hour = w1 = $6.00,Cost of tractor-wagon per hour = w2 = $20.00,Total fixed cost (TFC),The cost of all inputs that are fixed in the short run are called total fixed costs,

4、Assume that wagons hours is fixed at 1,For this example, then TFC = $20.00,Fixed Cost Curve,0,20,40,60,80,100,0,400,800,1200,1600,2000,2400,Cost,Output - y,Graphical representation,x1 x2 TPP APP A MPP MPP TFC TVC TC AFC AVC ATC AMC MC 0.00 1.00 0.00 0.00 20.0 0.00 20.00,Data on hay hauling,1.0 1.0 3

5、8.0 38.00 38.00 74.0 20.0 6.00 26.00 0.526 0.158 0.684 0.158 0.081,2.0 1.0 144.0 72.00 106.00 136.0 20.0 12.00 32.00 0.139 0.083 0.222 0.057 0.044,3.0 1.0 306.0 102.00 162.00 186.0 20.0 18.00 38.00 0.065 0.059 0.124 0.037 0.032,x1 x2 TPP APP A MPP MPP TFC TVC TC AFC AVC ATC AMC MC 0.00 1.00 0.00 0.0

6、0 20.0 0.00 20.00,Data on hay hauling,1.0 1.0 38.0 38.00 38.00 74.0 20.0 6.00 26.00 0.526 0.158 0.684 0.158 0.081,2.0 1.0 144.0 72.00 106.00 136.0 20.0 12.00 32.00 0.139 0.083 0.222 0.057 0.044,3.0 1.0 306.0 102.00 162.00 186.0 20.0 18.00 38.00 0.065 0.059 0.124 0.037 0.032,4.0 1.0 512.0 128.00 206.

7、00 224.0 20.0 24.00 44.00 0.039 0.047 0.086 0.029 0.027 5.0 1.0 750.0 150.00 238.00 250.0 20.0 30.00 50.00 0.027 0.040 0.067 0.025 0.024 6.0 1.0 1008.0 168.00 258.00 264.0 20.0 36.00 56.00 0.020 0.036 0.056 0.023 0.023 7.0 1.0 1274.0 182.00 266.00 266.0 20.0 42.00 62.00 0.016 0.033 0.049 0.023 0.023

8、 8.0 1.0 1536.0 192.00 262.00 256.0 20.0 48.00 68.00 0.013 0.031 0.044 0.023 0.023 9.0 1.0 1782.0 198.00 246.00 234.0 20.0 54.00 74.00 0.011 0.030 0.042 0.024 0.026 10.0 1.0 2000.0 200.00 218.0 200.0 20.0 60.00 80.0 0.010 0.030 0.040 0.028 0.030 11.0 1.0 2178.0 198.00 178.0 154.0 20.0 66.00 86.0 0.0

9、09 0.030 0.039 0.034 0.039 12.0 1.0 2304.0 192.00 126.0 96.0 20.0 72.00 92.0 0.009 0.031 0.040 0.048 0.063 13.0 1.0 2366.0 182.00 62.0 26.0 20.0 78.00 98.0 0.008 0.033 0.041 0.097 0.231 14.0 1.0 2352.0 168.00 -14.0 -56.0 20.0 84.00 104.0 0.009 0.036 0.044,Total variable cost (TVC),Remember that the

10、cost of all the inputs that are variable in the short run is called total variable cost,For our example TVC(38) = $6.00,And TVC (306) = $18.00,Data on hay hauling,x1 x2 TPP APP A MPP MPP TFC TVC TC AFC AVC ATC AMC MC 0.00 1.00 0.00 0.00 20.0 0.00 20.00 1.0 1.0 38.0 38.00 38.00 74.0 20.0 6.00 26.00 0

11、526 0.158 0.684 0.158 0.081 2.0 1.0 144.0 72.00 106.00 136.0 20.0 12.00 32.00 0.139 0.083 0.222 0.057 0.044 3.0 1.0 306.0 102.00 162.00 186.0 20.0 18.00 38.00 0.065 0.059 0.124 0.037 0.032,Data on hay hauling,x1 x2 TPP APP A MPP MPP TFC TVC TC AFC AVC ATC AMC MC 0.00 1.00 0.00 0.00 20.0 0.00 20.00

12、1.0 1.0 38.0 38.00 38.00 74.0 20.0 6.00 26.00 0.526 0.158 0.684 0.158 0.081 2.0 1.0 144.0 72.00 106.00 136.0 20.0 12.00 32.00 0.139 0.083 0.222 0.057 0.044 3.0 1.0 306.0 102.00 162.00 186.0 20.0 18.00 38.00 0.065 0.059 0.124 0.037 0.032 4.0 1.0 512.0 128.00 206.00 224.0 20.0 24.00 44.00 0.039 0.047

13、0.086 0.029 0.027 5.0 1.0 750.0 150.00 238.00 250.0 20.0 30.00 50.00 0.027 0.040 0.067 0.025 0.024 6.0 1.0 1008.0 168.00 258.00 264.0 20.0 36.00 56.00 0.020 0.036 0.056 0.023 0.023 7.0 1.0 1274.0 182.00 266.00 266.0 20.0 42.00 62.00 0.016 0.033 0.049 0.023 0.023 8.0 1.0 1536.0 192.00 262.00 256.0 20

14、0 48.00 68.00 0.013 0.031 0.044 0.023 0.023 9.0 1.0 1782.0 198.00 246.00 234.0 20.0 54.00 74.00 0.011 0.030 0.042 0.024 0.026 10.0 1.0 2000.0 200.00 218.0 200.0 20.0 60.00 80.0 0.010 0.030 0.040 0.028 0.030 11.0 1.0 2178.0 198.00 178.0 154.0 20.0 66.00 86.0 0.009 0.030 0.039 0.034 0.039 12.0 1.0 23

15、04.0 192.00 126.0 96.0 20.0 72.00 92.0 0.009 0.031 0.040 0.048 0.063 13.0 1.0 2366.0 182.00 62.0 26.0 20.0 78.00 98.0 0.008 0.033 0.041 0.097 0.231 14.0 1.0 2352.0 168.00 -14.0 -56.0 20.0 84.00 104.0 0.009 0.036 0.044,Graphical representation of TVC,Total Variable Cost,0,20,40,60,80,100,0,400,800,12

16、00,1600,2000,2400,Cost,Output - y,Total cost (TC),The cost of all inputs used by the firm is calledtotal costs,TC = TFC + TVC,Specifically, the sum of fixed and variable costsis called total costs,Cost function,Graphical representation of total cost (TC),Total Cost Curves,0,20,40,60,80,100,0,400,800

17、1200,1600,2000,2400,Cost,Output - y,Average cost (AC),Average cost is just a total cost figure divided by the associated output level,AC represents the average per unit cost of a given level of output,There are average costs associated with each level of total costs,Average fixed cost is given by,A

18、verage variable cost is given by,Average (total) cost is given by,Data on hay hauling,x1 x2 TPP(y) APP A MPP MPP TFC TVC TC AFC AVC ATC AMC MC 0.00 1.00 0.00 0.00 20.0 0.00 20.00 1.0 1.0 38.0 38.00 38.00 74.00 20.0 6.00 26.00 0.526 0.158 0.684 0.158 0.081 2.0 1.0 144 72.00 106.0 136.0 20.0 12.0 32.0

19、 0.139 0.083 0.222 0.057 0.044 3.0 1.0 306.0 102.00 162.00 186.00 20.0 18.00 38.00 0.065 0.059 0.124 0.037 0.032 4.0 1.0 512.0 128.00 206.00 224.00 20.0 24.00 44.00 0.039 0.047 0.086 0.029 0.027 5.0 1.0 750.0 150.00 238.00 250.00 20.0 30.00 50.00 0.027 0.040 0.067 0.025 0.024 6.0 1.0 1008.0 168.00 2

20、58.00 264.00 20.0 36.00 56.00 0.020 0.036 0.056 0.023 0.023 7.0 1.0 1274.0 182.00 266.00 266.00 20.0 42.00 62.00 0.016 0.033 0.049 0.023 0.023 8.0 1.0 1536.0 192.00 262.00 256.00 20.0 48.00 68.00 0.013 0.031 0.044 0.023 0.023 9.0 1.0 1782.0 198.00 246.00 234.00 20.0 54.00 74.00 0.011 0.030 0.042 0.0

21、24 0.026 10.0 1.0 2000.0 200.00 218.0 200.00 20.0 60.00 80.0 0.010 0.030 0.040 0.028 0.030 11.0 1.0 2178.0 198.00 178.0 154.00 20.0 66.00 86.0 0.009 0.030 0.039 0.034 0.039 12.0 1.0 2304.0 192.00 126.0 96.00 20.0 72.00 92.0 0.009 0.031 0.040 0.048 0.063 13.0 1.0 2366.0 182.00 62.0 26.00 20.0 78.00 9

22、8.0 0.008 0.033 0.041 0.097 0.231 14.0 1.0 2352.0 168.00 -14.0 -56.00 20.0 84.00 104.0 0.009 0.036 0.044,Average Fixed Cost,0.0,0.1,0.2,0.3,0.4,0.5,0.6,0.7,0.8,0,400,800,1200,1600,2000,2400,Cost,Output - y,Average Variable Cost,0.00,0.05,0.10,0.15,0.20,0,400,800,1200,1600,2000,2400,Cost,Output - y,N

23、ote that ATC = AVC + AFC,Average Cost Curves,0.00,0.10,0.20,0.30,0.40,0,400,800,1200,1600,2000,2400,Cost,Output - y,Marginal cost,Marginal cost is the increment, or addition, to cost that results from producing one more unit of output,The increase in total cost is the increase in variable cost,In di

24、screte or average terms marginal cost is given by,Marginal cost is just the derivative of thecost function with respect to y,Example calculation,x1 x2 y TFC TVC TC AVE MC 0.0 1.0 0.0 20.0 0.00 20.00 1.0 1.0 38.0 20.0 6.00 26.00 0.158 2.0 1.0 144.0 20.0 12.00 32.00 0.057 3.0 1.0 306.0 20.0 18.00 38.0

25、0 0.037 4.0 1.0 512.0 20.0 24.00 44.00 0.029 5.0 1.0 750.0 20.0 30.00 50.00 0.025 6.0 1.0 1008.0 20.0 36.00 56.00 0.023,Graphical representation of Marginal Cost,0.00,0.05,0.10,0.15,0.20,0,400,800,1200,1600,2000,2400,Cost,Output - y,Relationship between MC & MPP (1 variable input),When MPP rises, MC

26、 falls,When MPP falls, MC rises,Marginal Cost Curve,0.00,0.05,0.10,0.15,0.20,0,400,800,1200,1600,2000,2400,Cost,Output - y,Marginal Product of Input 1,-50,0,50,100,150,200,250,300,2,4,6,8,10,12,14,Input - x,1,Output - y,4. The marginal cost curve will intersect AVCand ATC at their minimum points,Ave

27、rage and marginal costs,1. When marginal cost is below the average cost,the average cost curve is falling,2. When the marginal and average costs are equal,the average cost curve does not change(is at minimum point),3. When the marginal cost is greater thanaverage cost, average cost is rising,Average and Marginal Cost Curves,0.0,0.1,0.2,0.3,0,400,800,1200,1600,2000,2400,Cost,Output - y,Cost curves for alternative function,0,50,100,150,200,250,300,350,400,450,500,0,10,20,30,40,Output - y,Cost,Average and Marginal Cost Curves,0,4,8,12,16,20,24,28,32,36,40,0,10,20,30,Output - y,Cost,The End,