ECON20002 Lecture Notes - Lecture 13: European Cooperation In Science And Technology, Fixed Cost, Marginal Product
27 Jul 2018
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Include the opportunity cost of resources used during production. Expenditure that has been made and cannot be recovered. Opportunity cost associated with opportunities forgone when a firm"s resources aren"t put to their best alternative use. No alternative use opportunity cost is zero. Not included in firm"s economic costs shouldn"t influence firm"s decisions. Cost firm must pay to produce q units of output. Fc cost that doesn"t vary with the level of output. Can be eliminated only by going out of business (e. g. ) plant maintenance, insurance. Costs are the same regardless of units produced. Key difference is fixed costs have positive opportunity cost therefore affect firm"s optimal decision. Vc cost that varies as output varies (e. g. ) wages, salaries, raw material expenses. Let k be fixed at 16, rental rate of capital (r)=2, wage=w: Atc firm"s total cost divided by its output. ()=(cid:3020)() =+() Mc increase in cost that results from producing one extra unit of output. ()=(cid:3020)()
