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13
1.
5
FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
2.
13 The Costs
of Production
3.
4.
5.
6.
7.
8.
9.
10.
11.
Figure 1 Economic
versus Accountants Copyright © 2004 South-Western How an Economist Views a Firm How an Accountant Views a Firm Revenue Total opportunity costs Revenue Economic profit Implicit costs Explicit costs Explicit costs Accounting profit
12.
Table 1 A
Production Function and Total Cost: Hungry Helen’s Cookie Factory Copyright©2004 South-Western
13.
14.
15.
16.
Figure 2 Hungry
Helen’s Production Function Copyright © 2004 South-Western Quantity of Output (cookies per hour) 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 Number of Workers Hired 0 1 2 3 4 5 Production function
17.
18.
19.
Table 1 A
Production Function and Total Cost: Hungry Helen’s Cookie Factory Copyright©2004 South-Western
20.
Figure 3 Hungry
Helen’s Total-Cost Curve Copyright © 2004 South-Western Total Cost $80 70 60 50 40 30 20 10 Quantity of Output (cookies per hour) 0 10 20 30 150 130 110 90 70 50 40 140 120 100 80 60 Total-cost curve
21.
22.
23.
24.
Table 2 The
Various Measures of Cost: Thirsty Thelma’s Lemonade Stand Copyright©2004 South-Western
25.
26.
27.
Average Costs
28.
Table 2 The
Various Measures of Cost: Thirsty Thelma’s Lemonade Stand Copyright©2004 South-Western
29.
30.
Marginal Cost
31.
Marginal Cost
Thirsty Thelma’s Lemonade Stand
32.
Figure 4 Thirsty
Thelma’s Total-Cost Curves Copyright © 2004 South-Western Total Cost $15.00 14.00 13.00 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 Quantity of Output (glasses of lemonade per hour) 0 1 4 3 2 7 6 5 9 8 10 Total-cost curve
33.
Figure 5 Thirsty
Thelma’s Average-Cost and Marginal-Cost Curves Copyright © 2004 South-Western Costs $3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Quantity of Output (glasses of lemonade per hour) 0 1 4 3 2 7 6 5 9 8 10 MC ATC AVC AFC
34.
35.
Figure 5 Thirsty
Thelma’s Average-Cost and Marginal-Cost Curves Copyright © 2004 South-Western Costs $3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Quantity of Output (glasses of lemonade per hour) 0 1 4 3 2 7 6 5 9 8 10 MC
36.
37.
38.
Figure 5 Thirsty
Thelma’s Average-Cost and Marginal-Cost Curves Copyright © 2004 South-Western Costs $3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Quantity of Output (glasses of lemonade per hour) 0 1 4 3 2 7 6 5 9 8 10 ATC
39.
40.
41.
Figure 5 Thirsty
Thelma’s Average-Cost and Marginal-Cost Curves Copyright © 2004 South-Western Costs $3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 Quantity of Output (glasses of lemonade per hour) 0 1 4 3 2 7 6 5 9 8 10 ATC MC
42.
43.
Big Bob’s Cost
Curves
44.
Figure 6 Big
Bob’s Cost Curves Copyright © 2004 South-Western (a) Total-Cost Curve $18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 Quantity of Output (bagels per hour) TC 4 2 6 8 14 12 10 2.00 Total Cost 0
45.
Figure 6 Big
Bob’s Cost Curves Copyright © 2004 South-Western (b) Marginal- and Average-Cost Curves Quantity of Output (bagels per hour) Costs $3.00 2.50 2.00 1.50 1.00 0.50 0 4 2 6 8 14 12 10 MC ATC AVC AFC
46.
47.
48.
49.
Figure 7 Average
Total Cost in the Short and Long Run Copyright © 2004 South-Western Quantity of Cars per Day 0 Average Total Cost 1,200 $12,000 ATC in short run with small factory ATC in short run with medium factory ATC in short run with large factory ATC in long run
50.
51.
Figure 7 Average
Total Cost in the Short and Long Run Copyright © 2004 South-Western Quantity of Cars per Day 0 Average Total Cost 1,200 $12,000 1,000 10,000 Economies of scale ATC in short run with small factory ATC in short run with medium factory ATC in short run with large factory ATC in long run Diseconomies of scale Constant returns to scale
52.
53.
54.
55.
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