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COSTS

COSTS. Remember…. **Scarcity forces people to make decisions about how they will use their resources!!! **Economic decision making requires people to consider all the costs and benefits of a decision!!. Opportunity Costs … What You LOST !. Fixed Costs

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COSTS

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  1. COSTS

  2. Remember…. • **Scarcity forces people to make decisions about how they will use their resources!!! • **Economic decision making requires people to consider all the costs and benefits of a decision!!

  3. Opportunity Costs… What You LOST! • Fixed Costs • Costs or expenses that are the same no matter how many units of are good are produced • Ex: mortgage payments, rent

  4. Variable Costs • Costs or expenses that change with the number of products produced • These costs increase when production increases and decrease when production decreases • Ex: wages, raw materials, electricity bills, water bills

  5. Total Costs • - Fixed Costs + VariableCosts = Total Costs

  6. Marginal Costs • The extra or additional cost of producingone additional unit of an output • Ex: 30 bike helmets= $1500, 31 bike helmets= $1550  marginal cost= $50

  7. Marginal Revenue • the extra revenue that results from selling one more unit of an output

  8. Cost-Benefit Analysis • - an economic decision making technique that tells us to choose an action or make a decision when the benefits are greater than the costs

  9. Technology • ROBOTICS: machines perform physical tasks • INVENTIONS new goods and services • INNOVATIONS: improving a good or service • AUTOMATION: machines control production

  10. GROSS DOMESTIC PRODUCT • the total value, in dollars, of all of the FINAL goods and services produced INa country during a single year; measures the size and success of the NATION’S ECONOMY. • the sale of USED goods are NOT included in GDP • CAPITAL GOODS are not included in GDP

  11. GDP is an important measure of STANDARD OF LIVING: the quality of life based on the possession of necessities and luxuries that make life easier. • GDP measures QUANTITYNOTQUALITY.

  12. Alberta wants to invite her friends over for dinner, but the only time they can come is Tuesday night when her favorite show, Gilmore Girls, is on. She decides to invite her friends because she would enjoy their company. Alberta invites seven friends over, but she needs to know how many are coming so she’ll have enough food. Alberta is making spaghetti with meatballs and has to go to the grocery store no matter how many friends decide to come. • Alberta’s Opportunity Cost ____________________________________________ • Alberta’s Fixed Cost _________________________________________________ • Alberta’s Variable Cost _______________________________________________

  13. Jack owns a shoe repair shop. His rent for the shop is $1500.00 a month. Jack pays his employees $8.00 an hour and adds a raise of $.50 for every six months they have been working at Jack’s Shoes. Since the weekend is the busiest Jack has three employees work on Friday and Saturday and only one employee on Monday through Thursday. • Jack’s Fixed Cost _________________________________________________________ • Jack’s Variable Cost _______________________________________________________ • Incentive for Workers

  14. Andy’s pool hall is open from 5-10 pm. Andy is considering extending his store hours on Friday nights. He hears from many of his customers that he will have more business from college students if he keeps his pool hall open until 2 AM. Andy is trying to decide if the benefits outweigh the costs of keeping the store open. • Andy’s Fixed Cost _ • Andy’s Variable Cost • Andy’s Total Cost • Andy’s Marginal Cost • Andy’s Marginal Revenue

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