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How do we figure out the cost of a product before they are actually produced?

How do we figure out the cost of a product before they are actually produced?. How much do I have to charge to make the best profit?. How do we figure out the cost of a product before they are actually produced?. this is called the production possibility frontier (PPF). What is the PPF?.

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How do we figure out the cost of a product before they are actually produced?

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  1. How do we figure out the cost of a product before they are actually produced? How much do I have to charge to make the best profit?

  2. How do we figure out the cost of a product before they are actually produced? this is called the production possibility frontier (PPF)

  3. What is the PPF? This is the ability to compare the opportunity costs of alternative choices showing the varying amounts of two products with the same fixed resources does this

  4. Ex. We have five acres of forest lumber and we are trying to decide what to do with the lumber. We could make 5,000 pounds of paper or 10,000 2X4’s or some combination of both. We are looking for the best combination. (that is PPF)

  5. Production Possibility Table Consider the case of an island economy that produces only two goods: wine and grain.

  6. TheProduction possibility frontier (PPF)is the curve resulting when the data is graphed

  7. The PPF shows all efficient combinations of output for this island economy when the factors of production are used to their full potential. Point A= Under production Point B= Is not possible

  8. What happens if we have a break through? • -The Curve shifts • Due to increase in technology • Increased production capacity A Shifted PPF

  9. If the two products are almost identical the resulting graph is a straight line PPF for Very Similar Products

  10. Marginal cost • The opportunity cost of producing one more unit of a good or service.

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