PPT_Econ_standardch08.ppt

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1、Short-RunCostsandOutputDecisionsFernando&YvonnQuijanoPreparedby:2of328Short-RunCostsandOutputDecisionsCostsintheShortRunFixedCostsVariableCostsTotalCostsShort-RunCosts:AReviewOutputDecisions:Revenues,Costs,andProfitMaximizationTotalRevenue(TR)andMarginalRevenue(MR)ComparingCostsandRevenuestoM

2、aximizeProfitTheShort-RunSupplyCurveLookingAheadCHAPTEROUTLINEPARTIITHEMARKETSYSTEMChoicesMadebyHouseholdsandFirms3of32Short-RunCostsandOutputDecisionsYouhaveseenthatfirmsinperfectlycompetitiveindustriesmakethreespecificdecisions.FIGURE8.1DecisionsFacingFirms4of32CostsintheShortRunfixedcostAny

3、costthatdoesnotdependonthefirmslevelofoutput.Thesecostsareincurredevenifthefirmisproducingnothing.Therearenofixedcostsinthelongrun.variablecostAcostthatdependsonthelevelofproductionchosen.totalcost(TC)Fixedcostsplusvariablecosts.TC=TFC+TVC5of32CostsintheShortRuntotalfixedcosts(TFC)oroverheadThe

4、totalofallcoststhatdonotchangewithoutputevenifoutputiszero.TotalFixedCost(TFC)FixedCostsTABLE8.1Short-RunFixedCost(TotalandAverage)ofaHypotheticalFirm(1)Q(2)TFC(3)AFC(TFC/Q)012345$1,0001,0001,0001,0001,0001,000$-1,0005003332502006of32CostsintheShortRunTotalFixedCost(TFC)FixedCosts

5、FIGURE8.2Short-RunFixedCost(TotalandAverage)ofaHypotheticalFirmAveragefixedcostissimplytotalfixedcostdividedbythequantityofoutput.Asoutputincreases,averagefixedcostdeclinesbecausewearedividingafixednumber($1,000)byalargerandlargerquantity.7of32CostsintheShortRunAverageFixedCost(AFC)FixedCostsa

6、veragefixedcost(AFC)Totalfixedcostdividedbythenumberofunitsofoutput;aper-unitmeasureoffixedcosts.spreadingoverheadTheprocessofdividingtotalfixedcostsbymoreunitsofoutput.Averagefixedcostdeclinesasquantityrises.8of32CostsintheShortRunTotalVariableCost(TVC)VariableCoststotalvariablecost(TVC)Thetot

7、alofallcoststhatvarywithoutputintheshortrun.totalvariablecostcurveAgraphthatshowstherelationshipbetweentotalvariablecostandthelevelofafirm’soutput.9of32(9x$2)+(6x$1)=$24(6x$2)+(14x$1)=$2661496AB3unitsofoutput(7x$2)+(6x$1)=$20