Scot Wick Blog

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production Section 12 of 21 … Conrad has to decide how much to produce. He knows how his costs vary as he changes the level of production by finding the answer to the following two questions How much does it cost to make the typical cup of coffee? How much does it cost to increase production of coffee by 1 cup? … How much does it cost to make the typical cup of coffee? We divide the firm's total costs by the quantity of output it produces. If his coffee shop produces 2 cups of coffee per hour · column 2, total cost is $3.80 · column 7, average total cost per cup: $3.80 / 2 = $1.90 … … How much does it cost to increase production of coffee by 1 cup? In column 8 we see the marginal cost of making one more cup of coffee does not change at a constant rate. For example, looking at columns 2 and 8 · moving from making 2 cups to 3 ...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production Section 11 of 20 … Figure 3 - Conrad's Total Cost Curve Quantity of output produced is on the horizontal axis, from Table 2 column 1. Total cost of production is on the vertical axis, from Table 2 column 2. The total cost curve gets steeper as the quantity of output increases because of diminishing marginal product. … From data on a firm's costs such as Table 2 we can derive several related cost measures useful for analyzing production and pricing decisions. Table 2 is cost data for another small business, Conrad's Coffee Shop. Column 1 shows the number of cups of coffee Conrad can produce per hour, from 0 to 10 cups. Column 2 shows Conrad's total cost of producing coffee at each quantity. Figure 3 is a Conrad's total-cost curve. Quantity of coffee from column 1 is on the horizontal axis. Total cos...

  Why Do Corporations Care About Their Stock Prices? First, watch this short video: https://www.youtube.com/watch?v=BI0CR71aX64 Mostly summarized from Investopedia: Corporations receive investment money only when they first sell stock shares (ownership shares of the corporation) to the public, the initial public offering (IPO). In the subsequent trading of these shares on the stock market the buyers and sellers of the shares directly gain/suffer the monetary benefits/losses from the fluctuating share price, the corporation does not. … Note, stock options are referred to below, to clarify in advance here’s an example: Corporation A current stock price is $100. A new executive is hired and is given 10,000 shares of stock options at target price of $120. Terms are the new executive cannot cash in (sell) the stock options until the stock price reaches $120. When the stock price reaches $120 the executive can sell the options for total $1,200,000, or can wait and hope to sell later at a...

  As posted on Facebook...  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production Section 10 of 20 … Columns 4, 5, and 6 of Table 1 show Caroline's costs of production The cost of Caroline's factory is fixed at $30 per hour, e.g. rent and maintenance, this is the same regardless of number of workers and quantity of production. The cost of a worker is $10 per hour. With 1 worker, her total cost is $40 per hour. With 2 workers, her total cost is $50 per hour. With 6 workers, her total cost is $90 per hour. The table shows how the number of workers Caroline hires is related to · column 2 the quantity of cookies she produces · column 6 her total cost of production … For Caroline’s production and pricing decisions, the most important relationship is between these two columns 2 and 6. Figure 2 panel (b) total-cost curve graphs data of columns 2 and 6 · quantity produced...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production  Section 9 of 20 … On Table 1, notice as the column 1 number of workers increases, the column 3 marginal (added) product decreases · the second worker has a marginal product of 40 cookies · the third worker has a marginal product of 30 cookies · the sixth worker has a marginal product of 5 cookies This property is called diminishing marginal product. With only a few workers, they have easy and complete access to Caroline's kitchen equipment. As the number of workers increases, they have less access to the equipment because others are using. Eventually as more workers are added there is no increased production as they are added. … The diminishing marginal product is shown in Figure 2, panel (a) production function. The change of the production function's slope shows change in Caroline's output of cookies for...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production Section 8 of 20 … Figure 2 panel (a) of is a graph of columns 1 and 2 of Table 1. This is the production function graph and shows the relationship between · the quantity of inputs, workers, and · the quantity of output, cookies One of the Ten Principles of Economics, #3: rational people think at the margin. This idea is key to understanding the decisions a firm makes about how many workers to hire and how much output to produce. … Column 3 of Table 1 shows the marginal product of a worker. The marginal product of any input in the production process is the increase in the quantity of output obtained from one additional unit of input. When the number of workers goes from 1 to 2 · cookie production increases from 50 to 90 · the marginal product of the second worker is 40 cookies When the number of workers goes from 2...

  Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 5 Firm Behavior and the Organization of Industry Chapter 13 of 36 The Costs of Production Section 7 of 20 … Figure 2 - Caroline's Production Function and Total-Cost Curve Panel (a) production function in shows the relationship between · the number of workers hired · the quantity of output produced The number of workers hired, on the horizontal axis, is from Table 1 column 1 The quantity of output produced, on the vertical axis, is from column 2. The panel (a) production function gets flatter as the number of workers increases because of diminishing marginal product. … Panel (b) total-cost curve shows the relationship between · the quantity of output produced · total cost of production The quantity of output produced, on the horizontal axis, is from column 2. The total cost, on the vertical axis, is from column 6. The panel (b) total-cost curve gets steeper as the quantity of output increases because of...