1、Unit 2Text:Cost of Production（生产成本）1.Key words2.What are costs?3.The various measures of cost4.Questionsprofit-maximizing firmtotal costopportunity costexplicit costimplicit costcash outlaykeeping track of the moneyfinancial statementfinancial capitalinterest rateeconomic profitaccounting profitfina
2、ncial reportnormal profitfixed costvariable costaverage total costaverage fixed costaverage variable costmarginal costprivate costsocial costsocial benefit2.1 Total revenue,total cost,and profit 2.2 Costs as opportunity costs2.3 The cost of capital as an opportunity cost2.4 Economic profit versus ac
3、counting profitTotal revenue The amount that the firm receives for the sale of its output is called its total revenue.It equals the quantity of output the firm produces times the price at which it sells its output.Total cost The amount that the firm pays to buy inputs is called its total cost.Profit
4、 Profit is a firms total revenue minus its total cost.That is,Profit=Total revenueTotal cost.2.2.1 Definition of opportunity costs2.2.2 Explicit and implicit costs2.2.3 Difference between economists and accountantsThe opportunity cost of an item refers to all those things that must be forgone to acq
5、uire that item.When economists speak of a firms cost of production,they include all the opportunity costs of making its output of goods and services.Explicit costs Some costs require the firm to pay out some money,they are called explicit costs.Implicit costs Some of a firms opportunity costs,called
6、 implicit costs,do not require a cash outlay.The distinction between explicit and implicit costs highlights an important difference between how economists and accountants analyze a business.Economists are interested in studying how firms make production and pricing decisions.Because these decisions
7、are based on both explicit and implicit costs,economists include both when measuring a firms costs.By contrast,accountants have the job of keeping track of the money that flows into and out of firms.As a result,they measure the explicit costs but often ignore the implicit costs.An important implicit
8、 cost of almost every business is the opportunity cost of the financial capital that has been invested in the business.2.4.1 Economic profit2.4.2 Accounting profit2.4.3 Normal profitAn economist measures a firms economic profit as the firms total revenue minus all the opportunity costs(explicit and
9、implicit)of producing the goods and services sold.For a business to be profitable from an economists standpoint,total revenue must cover all the opportunity costs,both explicit and implicit.An accountant measures the firms accounting profit as the firms total revenue minus only the firms explicit co
10、sts.Notice that because the accountant ignores the implicit costs,accounting profit is usually larger than economic profit.Economists call a zero economic profit as normal profit.Normal profit is the minimum profit necessary to keep a firm in operation.Zero economic profit signifies there is just en
11、ough total revenue to pay the owners for all explicit and implicit costs.Stated differently,there is no benefit from reallocating resources to another use.3.1 Fixed and variable costs3.2 Average and marginal cost3.3 Private costs and social costsFixed costs Some costs,called fixed costs,do not vary
12、with the quantity of output produced.They are incurred even if the firm produces nothing at all.Variable costs Some of the firms costs,called variable costs,change as the firm alters the quantity of output produced.Total cost A firms total cost is the sum of fixed and variable costs.3.2.1 Average to
13、tal cost3.2.2 Average fixed cost 3.2.3 Average variable cost 3.2.4 Marginal cost Average total cost divided by the quantity of output is called average total cost.Because total cost is just the sum of fixed and variable costs,average total cost can be expressed as the sum of average fixed cost and a
14、verage variable cost.Average total cost tells us the cost of a typical unit of output if total cost is divided evenly over all the units produced.Average fixed cost is the fixed cost divided by the quantity of output.Average variable cost is the variable cost divided by the quantity of output.Margin
15、al cost=Change in total cost/Change in quantityMarginal cost tells us the increase in total cost that arises from producing an additional unit of output.3.3.1 Private costs3.3.2 Social costs The private costs of a firm are the sum of the explicit and implicit costs that it incurs.The social costs of
16、 a firm are those that society in general bears because of the firms activities.Social costs would include the private costs of a firm,since presumably all of the firms resources could be used elsewhere in producing goods of value to(at least some members of)society.However,social costs would also i
17、nclude costs paid for by society but not by the firm,even though such costs were a result of production by the firm.(1)What is the relationship between a firms total revenue,profit,and total cost?(2)What is the relationship between a firms total cost,average total cost,and marginal cost?(3)Explain the opportunity cost.(4)What is the difference between economic profit and accounting profit.(5)Give an example of a social cost which is paid for by society but not by the firm because of the result of production by the firm,explain.
