Cost of production
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COST OF PRODUCTION. Microeconomics Made Easy by William Yacovissi Mansfield University William Yacovissi All Rights Reserved. COST OF PRODUCTION. In order to make a product, or offer a service, a company must buy or supply the materials needed to make the product.

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COST OF PRODUCTION

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Cost of production

COST OF PRODUCTION

Microeconomics Made Easy

by

William Yacovissi

Mansfield University

William Yacovissi All Rights Reserved


Cost of production1

COST OFPRODUCTION

  • In order to make a product, or offer a service, a company must buy or supply the materials needed to make the product.

  • These materials are called inputs, resources, intermediate goods, or factors of production.


Cost of production2

COST OF PRODUCTION

  • These things have value because they can be used to produce things people want.

  • They also have value because there are not enough of them available to produce everything everybody wants.


Cost of production3

COST OF PRODUCTION

  • The process of transforming inputs into a product for sale is called production.

  • The money spent to do this is called Costs or Total Cost.


Cost of production4

COST OF PRODUCTION

  • The cost per unit is called Average Cost or Average Total Cost and is calculated by Total Cost / Quantity or ATC = TC/Q.

  • For example, if it cost $400 to make 100 units of a product, then the average total cost, ATC = $400/100 = $4 per unit.


Cost of production5

COST OF PRODUCTION

  • If it cost $1 per rental in royalties and $1.50 in cost for overhead in renting the video, what price maximizes this businesses profits.?


Cost of production6

COST OF PRODUCTION


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