RES-ECON 162 Lecture Notes - Lecture 5: Perfect Competition, Marginal Cost, Externality

• School: UMASS-Amherst
• Department: Resource Economics
• Course: RES-ECON 162
• Professor: Laurence De Geeste

Document Summary

Direct costs- need certain productive inputs like labor, machinery, and raw material. Costs of production include what is paid to purchase these inputs. Opportunity costs- the value of something in its next most valuable use. External costs- it s the loss fro(cid:373) a (cid:374)egati(cid:448)e e(cid:454)ter(cid:374)alit(cid:455) (cid:894)des(cid:272)ri(cid:271)ed (cid:271)elo(cid:449)(cid:895) pollutio(cid:374) is a(cid:374) example. A negative externality occurs when the activity of some agent causes a loss to another without consent and without compensation. A marginal cost is the change in total cost resulting from a one unit change in output. Total cost is the cost of producing some number of output. Increasing total costs- it costs more to produce a higher level of output. Increasing marginal costs- the higher the level of output the more it costs to produce more. The basic effect of improving technology in companies is to lower the cost of producing something. Cost effectiveness- achieving a goal at lowest cost.