This is it – The Big ONE ! Chapter 22 + Chapter 23 Chapter 24 + Chapter 25.
-
Upload
shawn-sharp -
Category
Documents
-
view
219 -
download
3
Transcript of This is it – The Big ONE ! Chapter 22 + Chapter 23 Chapter 24 + Chapter 25.
Theory of the FirmTheory of the FirmTheory of the FirmTheory of the Firm
Pure MonopolyPure Monopoly Natural MonopolyNatural Monopoly DuopolyDuopoly OligopolyOligopoly Monopolistic CompetitiveMonopolistic Competitive Perfect CompetitionPerfect Competition
What is a producer’sability and willingness to offer a product for sale?Comparing revenue to costs!
How does demand relateto revenue, how does thatrelate to a firm’s profitmaximizing decisions – Which should lead to Economic efficiency!!Our big goal!
MonopolyMonopolyMonopolyMonopoly
Illegal in the United StatesIllegal in the United States
Near total control of an industry.Near total control of an industry.
Natural MonopolyNatural MonopolyNatural MonopolyNatural Monopoly
Allowed to exist because of cost Allowed to exist because of cost benefits, licenses, copyrights, patents, benefits, licenses, copyrights, patents,
and/or trademarks!!!and/or trademarks!!!
DuopolyDuopolyDuopolyDuopoly
Where two firms control over 80% of Where two firms control over 80% of the market and other companies are the market and other companies are
merely fringe players.merely fringe players.
OligopolyOligopolyOligopolyOligopoly
Five to seven firms dominate an Five to seven firms dominate an industry. industry.
Monopolistic CompetitiveMonopolistic CompetitiveMonopolistic CompetitiveMonopolistic Competitive
100’s of small franchises or 100’s of small franchises or businesses offer unique but similar businesses offer unique but similar
products or services.products or services.
Perfect CompetitionPerfect CompetitionPerfect CompetitionPerfect Competition
1000’s of small firms with no power 1000’s of small firms with no power to influence price or quantity in their to influence price or quantity in their market – NO MARKET POWER!market – NO MARKET POWER!
Pure CompetitionPure Competition
Market Structure ContinuumMarket Structure Continuum
Four Market ModelsFour Market Models
Pure MonopolyPure Monopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
Four Market ModelsFour Market Models
Imperfect CompetitionImperfect Competition
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
Four Market ModelsFour Market Models
Monopolistic CompetitionMonopolistic Competition
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
Four Market ModelsFour Market Models
OligopolyOligopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
Four Market ModelsFour Market Models
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition OligopolyOligopoly
Four Market ModelsFour Market ModelsNatural MonopolyNatural Monopoly
Market Structure ContinuumMarket Structure Continuum
PurePureCompetitionCompetition
PurePureMonopolyMonopoly
MonopolisticMonopolisticCompetitionCompetition
DuopolyDuopolyOligopolyOligopoly
Five Market ModelsFive Market Models
Natural Natural MonopolyMonopoly
Again what is a producer’s ability and willingness to offer a product for sale?
Overview!!!Overview!!!Overview!!!Overview!!!
TR > TC, TR = TC, TR < TC, TR < TVCTR > TC, TR = TC, TR < TC, TR < TVC Revenues: Total, Average, MarginalRevenues: Total, Average, Marginal Costs: Opportunity, Fixed, Sunk, Variable, Costs: Opportunity, Fixed, Sunk, Variable,
Total, Average Fixed, Average Variable, Total, Average Fixed, Average Variable, Average Total, and MarginalAverage Total, and Marginal
Profits: Total, Average, Marginal, Normal, Profits: Total, Average, Marginal, Normal, Economic, and AccountingEconomic, and Accounting
Marginal Cost = Marginal Cost = MCMC
Total Fixed Costs = Total Fixed Costs = TFCTFCTotal Variable Costs = Total Variable Costs = TVCTVC
Average Variable Costs = Average Variable Costs = AVCAVC
Total Costs = Total Costs = TCTC
Average Total Costs = Average Total Costs = ATCATC
Average Fixed Costs = Average Fixed Costs = AFCAFC
Summary of Definitions... Summary of Definitions...
Quantity
Co
sts
(do
llar
s)TC
TotalTotalCostCost
Fixed CostFixed CostLong v Short
run
Costs Graphically Presented...Costs Graphically Presented...
TVC
Variable CostVariable Cost
TFC
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFCLong v Short
run
AVCATC
MC
Costs Graphically Presented...Costs Graphically Presented...
To
tal
Pro
du
ct,
TP
Quantity of Labor
Ave
rag
e P
rod
uct
, A
P,
and
mar
gin
al p
rod
uct
, M
P
Quantity of Labor
Total OutputTotal Output
MarginalMarginalProductProduct
AverageAverageProductProduct
NegativeNegativeMarginalMarginalReturnsReturns
Law of Diminishing ReturnsLaw of Diminishing Returns
Copyright McGraw-Hill, Inc. 1999
Economic CostsEconomic CostsEconomic Costs or Economic Costs or Opportunity CostsOpportunity Costs
Forgoing the Forgoing the opportunityopportunity
to produce alternativeto produce alternativegoods and servicesgoods and services
Economic CostsEconomic CostsEconomic Costs or Opportunity Costs
Forgoing the opportunity
to produce alternativegoods and servicesExplicit CostsExplicit Costs-“out of pocket” costs
to those you pay for theirservices. Example - Labor
Economic CostsEconomic CostsEconomic Costs or Economic Costs or Opportunity CostsOpportunity Costs
Forgoing the opportunity
to produce alternativegoods and servicesExplicit CostsExplicit Costs
Implicit CostsImplicit Costs-self-owned, self-employedresources that could havewent to alternative uses.
• Treated as a costTreated as a cost• Required to attract & retain resourcesRequired to attract & retain resources•The money the entrepreneur is making The money the entrepreneur is making to keep them in the business.to keep them in the business.
Normal ProfitsNormal Profits
• Treated as a costTreated as a cost• Required to attract & retain resourcesRequired to attract & retain resources
Economic or Pure ProfitsEconomic or Pure Profits
Normal ProfitsNormal Profits
• Treated as a costTreated as a cost• Required to attract & retain resourcesRequired to attract & retain resources
Economic or Pure ProfitsEconomic or Pure Profits
EconomicEconomicprofitprofit
TotalTotalrevenuerevenue
Opportunity costOpportunity costof all inputsof all inputs
Normal ProfitsNormal Profits
TotalTotalRevenueRevenue
Profits to anProfits to anEconomistEconomist
Profits to anProfits to anAccountantAccountant
Copyright McGraw-Hill, Inc. 1999
ExplicitExplicitCostsCosts
AccountingAccountingcosts (explicitcosts (explicit
costs only)costs only)
TotalTotalRevenueRevenue
Profits to anProfits to anEconomistEconomist
Profits to anProfits to anAccountantAccountant
Copyright McGraw-Hill, Inc. 1999
ExplicitExplicitCostsCosts
AccountingAccountingcosts (explicitcosts (explicit
costs only)costs only)
AccountingAccountingProfitsProfits
TotalTotalRevenueRevenue
Profits to anProfits to anEconomistEconomist
Profits to anProfits to anAccountantAccountant
Copyright McGraw-Hill, Inc. 1999
Implicit costsImplicit costs(including a(including a
normal profit)normal profit)
ExplicitExplicitCostsCosts
AccountingAccountingcosts (explicitcosts (explicit
costs only)costs only)
AccountingAccountingProfitsProfits
Ec
on
om
ic (
op
po
rtu
nit
y) C
os
tsE
co
no
mic
(o
pp
ort
un
ity)
Co
sts
TotalTotalRevenueRevenue
Profits to anProfits to anEconomistEconomist
Profits to anProfits to anAccountantAccountant
Copyright McGraw-Hill, Inc. 1999
EconomicEconomicProfitsProfits
Implicit costsImplicit costs(including a(including a
normal profit)normal profit)
ExplicitExplicitCostsCosts
AccountingAccountingcosts (explicitcosts (explicit
costs only)costs only)
AccountingAccountingProfitsProfits
Ec
on
om
ic (
op
po
rtu
nit
y) C
os
tsE
co
no
mic
(o
pp
ort
un
ity)
Co
sts
TotalTotalRevenueRevenue
Profits to anProfits to anEconomistEconomist
Profits to anProfits to anAccountantAccountant
When a firm makes significant economic profit it may lure otherEntrepreneurs away from their current businesses.
A Significant Difference...A Significant Difference...
Accounting:Accounting: Short and long run Short and long run is basedis basedupon annual chronologyupon annual chronology
A Significant Difference...A Significant Difference...
Accounting:Accounting: Short and long run Short and long run is basedis basedupon annual chronologyupon annual chronology
Economics:Economics: Short run Short run has fixed planthas fixed plantcapacity sizecapacity size
Period of time where the firms capital cannot change as a response to increase in demand (fixed resources). You can hire more workers(variable resources) but not expand the factory.
A Significant Difference...A Significant Difference...
Accounting:Accounting: Short and long run Short and long run is basedis basedupon annual chronologyupon annual chronology
Economics:Economics: Short run Short run has fixed planthas fixed plantcapacity sizecapacity size
Long run Long run has variable planthas variable plantcapacity sizecapacity size
All resources are variable in the long run.
Marginal Concept - Successive UnitsMarginal Concept - Successive Units
Short-run Production Costs Short-run Production Costs
Costs are not only determined by price but the amount of a resource needed to produce that output. First we will look atcosts from the perspective of how much of a resource is neededto get a certain output or product.
Marginal Concept - Successive UnitsMarginal Concept - Successive Units
Total ProductTotal Product
Short-run Production Costs Short-run Production Costs
- the total output of a product that is produced.
Marginal Concept - Successive UnitsMarginal Concept - Successive Units
Average ProductAverage ProductTotal ProductTotal Product
Short-run Production Costs Short-run Production Costs
Out put per unit of resources used. How many pizzasmade with how many workers. 10/5 or TP/Q of resource.
Marginal Concept - Successive UnitsMarginal Concept - Successive Units
Average ProductAverage ProductMarginal ProductMarginal Product
Total ProductTotal Product
Short-run Production Costs Short-run Production Costs
The extra output associated with adding an additional unit of avariable resource. Change in TP/ Change in resource.
The major question is how much will output rise when additionalworkers are hired and when will this max out and why?
Law of Diminishing ReturnsLaw of Diminishing Returns
Marginal Concept - Successive UnitsMarginal Concept - Successive Units
Average ProductAverage ProductMarginal ProductMarginal Product
Graphically...Graphically...
Total ProductTotal Product
Short-run Production Costs Short-run Production Costs
As additional units of a variable resource are added toa fixed plant, beyond some point the extra amount of output will decline. See table on board.
To
tal
Pro
du
ct,
TP
Quantity of Labor
Ave
rag
e P
rod
uct
, A
P,
and
mar
gin
al p
rod
uct
, M
P
Quantity of Labor
Law of Diminishing ReturnsLaw of Diminishing Returns
Plotting Total Outputon this Graph
Plotting Average andmarginal product
on this Graph
To
tal
Pro
du
ct,
TP
Quantity of Labor
Ave
rag
e P
rod
uct
, A
P,
and
mar
gin
al p
rod
uct
, M
P
Quantity of Labor
Law of Diminishing ReturnsLaw of Diminishing Returns
MarginalMarginalProductProduct
AverageAverageProductProduct
Total OutputTotal Output
IncreasingIncreasingMarginalMarginalReturnsReturns
To
tal
Pro
du
ct,
TP
Quantity of Labor
Ave
rag
e P
rod
uct
, A
P,
and
mar
gin
al p
rod
uct
, M
P
Quantity of Labor
Law of Diminishing ReturnsLaw of Diminishing Returns
DiminishingDiminishingMarginalMarginalReturnsReturns
MarginalMarginalProductProduct
AverageAverageProductProduct
Total OutputTotal Output
To
tal
Pro
du
ct,
TP
Quantity of Labor
Ave
rag
e P
rod
uct
, A
P,
and
mar
gin
al p
rod
uct
, M
P
Quantity of Labor
Total OutputTotal Output
MarginalMarginalProductProduct
AverageAverageProductProduct
NegativeNegativeMarginalMarginalReturnsReturns
Law of Diminishing ReturnsLaw of Diminishing Returns
Other Cost Definitions... Other Cost Definitions... Now that we understand that producing “costs” us in terms of resources used, production information must be joined by the actual monetary costs.
Fixed CostsFixed Costs
Other Cost Definitions... Other Cost Definitions...
-those costs that do not changewith changes in output. Rent orinterest on loans.
Fixed CostsFixed CostsTotal Fixed CostsTotal Fixed Costs
Other Cost Definitions... Other Cost Definitions...
Fixed CostsFixed CostsTotal Fixed CostsTotal Fixed Costs
Average Fixed Costs =Average Fixed Costs =Total Fixed CostsTotal Fixed Costs
QuantityQuantity
Other Cost Definitions... Other Cost Definitions...
Also AFC * Q = TFC
Fixed CostsFixed CostsTotal Fixed CostsTotal Fixed Costs
Average Fixed Costs =Average Fixed Costs =Total Fixed CostsTotal Fixed Costs
QuantityQuantity
Variable CostsVariable Costs
Other Cost Definitions... Other Cost Definitions...
-those costs that vary with the level of output. Materials, some labor, fuel, etc…
Fixed CostsFixed CostsTotal Fixed CostsTotal Fixed Costs
Average Fixed Costs =Average Fixed Costs =Total Fixed CostsTotal Fixed Costs
QuantityQuantity
Variable CostsVariable CostsTotal Variable CostsTotal Variable Costs
Other Cost Definitions... Other Cost Definitions...
Fixed CostsFixed CostsTotal Fixed CostsTotal Fixed Costs
Average Fixed Costs =Average Fixed Costs =Total Fixed CostsTotal Fixed Costs
QuantityQuantity
Variable CostsVariable CostsTotal Variable CostsTotal Variable Costs
Average Variable Costs =Average Variable Costs =Total Variable CostsTotal Variable Costs
QuantityQuantity
Other Cost Definitions... Other Cost Definitions...
Also AVC * Q = TVC Average looks at costs on a per unit basis.
Total CostsTotal CostsTotal Fixed & Variable CostsTotal Fixed & Variable Costs
Other Cost Definitions... Other Cost Definitions...
Total CostsTotal CostsTotal Fixed & Variable CostsTotal Fixed & Variable Costs
Average Total Costs =Average Total Costs =Total CostsTotal Costs
QuantityQuantity
Other Cost Definitions... Other Cost Definitions...
Or ATC = AFC + AVC
Also ATC * Q = TC
Total CostsTotal CostsTotal Fixed & Variable CostsTotal Fixed & Variable Costs
Average Total Costs =Average Total Costs =Total CostsTotal Costs
QuantityQuantity
Marginal CostsMarginal Costs
Other Cost Definitions... Other Cost Definitions...
Total CostsTotal CostsTotal Fixed & Variable CostsTotal Fixed & Variable Costs
Average Total Costs =Average Total Costs =Total CostsTotal Costs
QuantityQuantity
Marginal CostsMarginal Costs
Marginal Cost =Marginal Cost =Change in Total CostsChange in Total Costs
Change in QuantityChange in Quantity
Other Cost Definitions... Other Cost Definitions...
Marginal is the cost incurred because we produced an additionalunit of output.
Marginal Cost = Marginal Cost = MCMC
Total Fixed Costs = Total Fixed Costs = TFCTFCTotal Variable Costs = Total Variable Costs = TVCTVC
Average Variable Costs = Average Variable Costs = AVCAVC
Total Costs = Total Costs = TCTC
Average Total Costs = Average Total Costs = ATCATC
Average Fixed Costs = Average Fixed Costs = AFCAFC
Summary of Definitions... Summary of Definitions...
Quantity
Co
sts
(do
llar
s)
TVC
Variable CostVariable Cost
Costs Graphically Presented...Costs Graphically Presented...
As we begin production variable costs increase at a decreasing rate.
Quantity
Co
sts
(do
llar
s)
TFC
Combining with variable cost...Combining with variable cost...
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Co
sts
(do
llar
s)
Costs Graphically Presented...Costs Graphically Presented...
TVC
Variable CostVariable Cost
Quantity
Co
sts
(do
llar
s) Add vertically toAdd vertically toget get Total CostTotal Cost
Costs Graphically Presented...Costs Graphically Presented...
TFC
TVC
Variable CostVariable Cost
Quantity
Co
sts
(do
llar
s)TC
TotalTotalCostCost
Fixed CostFixed Cost
Costs Graphically Presented...Costs Graphically Presented...
TVC
Variable CostVariable Cost
TFC
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
Plotting Average CostsPlotting Average Costs
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
AVC
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
AVC
Add vertically to get...Add vertically to get...
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
AVCATC
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
AVCATC
Plotting the changesPlotting the changesin total cost yields...in total cost yields...
Costs Graphically Presented...Costs Graphically Presented...
Quantity
Sh
ort
-ru
n a
vera
ge
cost
s (d
oll
ars)
AFC
AVCATC
MC
Costs Graphically Presented...Costs Graphically Presented...
Quantity of labor
Co
sts
(d
olla
rs)
Ave
rag
e p
rod
uct
an
dm
arg
inal
pro
du
ct
Quantity of output
Productivity & Cost Curve RelationshipProductivity & Cost Curve Relationship
Quantity of labor
Co
sts
(d
olla
rs)
Ave
rag
e p
rod
uct
an
dm
arg
inal
pro
du
ct
Quantity of output
MPMP
MCMC
Productivity & Cost Curve RelationshipProductivity & Cost Curve Relationship
Quantity of labor
Co
sts
(d
olla
rs)
Ave
rag
e p
rod
uct
an
dm
arg
inal
pro
du
ct
Quantity of output
MPMPAPAP
MCMCAVCAVC
Copyright McGraw-Hill, Inc. 1999
Productivity & Cost Curve RelationshipProductivity & Cost Curve Relationship
Shifting the costs curves Shifting the costs curves
When fixed costs change they shift When fixed costs change they shift The FC, AFC and ATC curves.The FC, AFC and ATC curves.
When variable costs change they shift When variable costs change they shift The VC, TC, AVC, ATC and MC curvesThe VC, TC, AVC, ATC and MC curves
Long-run Production Costs Long-run Production Costs
For every plant capacity size...For every plant capacity size...
there is a short-run there is a short-run ATCATC curve curve
All such plant capacitiesAll such plant capacitiescan be plotted...can be plotted...
Long-run Production Costs Long-run Production Costs
For every plant capacity size...For every plant capacity size...
there is a short-run there is a short-run ATCATC curve curve
Un
it C
ost
sU
nit
Co
sts
OutputOutput
For every plant capacity size...For every plant capacity size... there is a short-run ATC curve there is a short-run ATC curve
and every and every ATC ATC has a minimum costhas a minimum cost
Copyright McGraw-Hill, Inc. 1999
Long-run Production Costs Long-run Production Costs
Un
it C
ost
sU
nit
Co
sts
OutputOutput
An infinite number of such costAn infinite number of such costcurves can be constructed...curves can be constructed...
Copyright McGraw-Hill, Inc. 1999
Long-run Production Costs Long-run Production Costs
The The Long-run ATCLong-run ATC just “envelopes” just “envelopes”all of the short-run ATC curvesall of the short-run ATC curves
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Copyright McGraw-Hill, Inc. 1999
Long-run Production Costs Long-run Production Costs
Long-run ATCLong-run ATCUn
it C
ost
sU
nit
Co
sts
OutputOutput
Copyright McGraw-Hill, Inc. 1999
Long-run Production Costs Long-run Production Costs The shape of the LR Curve is similar to the SR Curve but the same explanation does not hold. In the short run costsincreased because the plant size was fixed. In the long run that isn’t so.
In the long run the shape is explained through economies of scale.
Economies of Scale in ProductionEconomies of Scale in ProductionAs plant size increases a number of factors will for a time leadto lower average costs.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization
The more specialized labor is the more productive up to a point.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization• Managerial SpecializationManagerial Specialization
Same explanation as labor up to a point.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization• Managerial SpecializationManagerial Specialization• Efficient CapitalEfficient Capital
The largest capital equipment is very expensive, only if you areproducing in large quantities can you afford this.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization• Managerial SpecializationManagerial Specialization• Efficient CapitalEfficient Capital• Other FactorsOther Factors
Design costs, advertising costs decline per unit as output is increased.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization• Managerial SpecializationManagerial Specialization• Efficient CapitalEfficient Capital• By-productsBy-products• Other FactorsOther FactorsDiseconomies of ScaleDiseconomies of ScaleWhen a firm gets too big to be able to efficiently do business.Less communication, worker alienation.
Economies of Scale in ProductionEconomies of Scale in Production• Labor SpecializationLabor Specialization• Managerial SpecializationManagerial Specialization• Efficient CapitalEfficient Capital• By-productsBy-products• Other FactorsOther FactorsDiseconomies of ScaleDiseconomies of ScaleConstant Returns to ScaleConstant Returns to Scale
graphically presented...graphically presented...
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Long-run ATC Curves Long-run ATC Curves
Copyright McGraw-Hill, Inc. 1999
Long-run ATCLong-run ATC
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Copyright McGraw-Hill, Inc. 1999
Long-run ATCLong-run ATC
EconomiesEconomiesof scaleof scale
Long-run ATC Curves Long-run ATC Curves
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Copyright McGraw-Hill, Inc. 1999
Long-run ATCLong-run ATC
EconomiesEconomiesof scaleof scale
Constant returnsConstant returnsto scaleto scale
Long-run ATC Curves Long-run ATC Curves
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Long-run ATCLong-run ATC
EconomiesEconomiesof scaleof scale
DiseconomiesDiseconomiesof scaleof scale
Constant returnsConstant returnsto scaleto scale
Copyright McGraw-Hill, Inc. 1999
Long-run ATC Curves Long-run ATC Curves
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Where extensiveWhere extensiveeconomies ofeconomies of
scale existscale exist
Copyright McGraw-Hill, Inc. 1999
Long-run ATC Curves Long-run ATC Curves
Long-run ATCLong-run ATC
Un
it C
ost
sU
nit
Co
sts
OutputOutput
Where economiesWhere economiesof scale areof scale are
quickly exhaustedquickly exhausted
Copyright McGraw-Hill, Inc. 1999
Long-run ATC Curves Long-run ATC Curves
Long-run ATCLong-run ATC
economic (opportunity) costeconomic (opportunity) cost explicit costsexplicit costs implicit costsimplicit costs normal profitnormal profit economic profiteconomic profit short runshort run long runlong run total producttotal product marginal productmarginal product average product average product law of diminishing returnslaw of diminishing returns fixed costsfixed costs
variable costsvariable costs total costtotal cost average fixed costaverage fixed cost average variable costaverage variable cost average total costaverage total cost marginal costmarginal cost economies of scaleeconomies of scale diseconomies of scalediseconomies of scale constant returns to scaleconstant returns to scale minimum efficient scaleminimum efficient scale natural monopolynatural monopoly