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Hen 368 lecture 8 production and costs
- 1. Health Economics Lecture 8 Production and Costs
- 2. Nurses Total Product Marginal Product ∆TP÷∆N Average Product TP÷N Total Cost Marginal Cost ∆TC÷∆N Average Cost TC÷N Total Profit TP-TC Marginal Profit MP-MC Average Profit TPr÷N 1 2 2 2 3 3 1 -1 -1 1 2 6 4 3 5 2 2.5 1 2 0.5 3 12 6 4 8 3 2.67 4 3 1.33 4 15 3 3.75 12 4 3 3 -1 0.75 5 14 -1 2.8 20 8 2.5 -6 -9 0.3 Productivity versus Cost
- 3. Nurses Total Product Marginal Product ∆TP÷∆N Average Product TP÷N Total Cost Marginal Cost ∆TC÷∆N Average Cost TC÷N Total Profit TP-TC Marginal Profit MP-MC Average Profit TPr÷N 1 2 3 2 6 5 3 12 8 4 15 12 5 14 20 Productivity versus Cost
- 4. 0 5 10 15 20 1 2 3 4 5 Total Product Total Cost
- 5. 0 5 10 15 20 1 2 3 4 5 Total Product Total Cost
- 6. -2 0 2 4 6 8 1 2 3 4 5 Marginal Product Marginal Cost
- 7. -2 0 2 4 6 8 1 2 3 4 5 Marginal Product Marginal Cost
- 8. -5 -4 -3 -2 -1 0 1 2 3 4 5 1 2 3 4 5 Total Profit
- 9. Rule Maximize Profits NOT Revenue Sell less and make more
- 10. Rule Watch marginal profit (marginal revenue - marginal cost)
- 11. Rule As long as marginal revenue is greater than marginal cost, then keep going.
- 12. Maximize Profits As long as marginal revenue is greater than marginal cost, then keep going.
- 16. Costs Short Run Long Run At least one input is fixed All inputs are variable
- 18. Costs Transaction Costs Produce yourself or contract out Outsourcing
- 19. Economies of Scope When resources can be shared between related outputs.
- 20. Economies of Scale Increase output more than increasing cost Bigger is more profitable
- 21. Remember It’s not just price or productivity It’s productivity divided by price
- 22. Ali Fahad Wage 50 100 Productivity 10 25 Wage ÷ Productivity 5 4
- 23. Average Costs Quantity Scale Economies of Scale Diseconomies of Scale The bigger you get, the lower your costs The bigger you get, the higher your costs