Micro Chapter 13 【The Costs of Production】

1. Definition of economic costs
Yakov lives in Chicago and runs a business that sells guitars. In an average year, he receives $721,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $421,000; he also pays wages and utility bills totaling $269,000. He owns his showroom; if he choos


2. Inputs and outputs
Maria's Performance Pizza is a small restaurant in Dallas that sells gluten-free pizzas. Maria's very tiny kitchen has barely enough room for the three ovens in which her workers bake the pizzas. Maria signed a lease obligating her to pay the rent for the three ovens for the next year. Because of this



3. The relationship between marginal and average costs
Consider the following scenario to understand the relationship between marginal and average values. Suppose Paolo is a professional basketball player, and his game log for free throws can be summarized in the following table.



4. Various measures of cost
Douglas Fur is a small manufacturer of fake-fur boots in Dallas. The following table shows the company's total cost of production at various production quantities.


5. Costs in the short run versus in the long run
Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced