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Warm Up

Warm Up. What do you think are the meaning of the following terms: Fixed costs Variable costs Can you think of any examples?. Definitions. Fixed costs : costs/expenses that are the same no matter how many units of a good are produced

shelley-hardin
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Warm Up

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  1. Warm Up What do you think are the meaning of the following terms: Fixed costs Variable costs Can you think of any examples?

  2. Definitions • Fixed costs: costs/expenses that are the same no matter how many units of a good are produced • Variable costs: costs/expenses that vary (change) with the number of units of a good produced • Total costs: fixed costs and variable costs added together

  3. Examples • Fixed Cost • Rent • Variable Cost • Employee wages

  4. Average Total Cost • Average Total Cost (ATC) = Total Cost (TC) divided by the quantity of output (Q) • ATC=TC Q • Example: • Total cost is $6,000 and 1,000 units of a good are produced, then the average total cost is $6 per unit ($6,000/1,000=$6)

  5. Marginal Cost • It is one of the two factors a business must know about when deciding how much of a good it is best to produce • Marginal means additional!

  6. Example • Cost increases to $6,008 with one more unit produced (1001) • Change in total cost = $8 • This change in total cost from producing one more unit is called marginal cost • The marginal cost is $8 • Marginal cost describes a change (in cost) caused by a change in something else (output) • MC=

  7. Let’s Think • What are the advantages and disadvantages of businesses that have only fixed costs? Variable costs? Do they exist?

  8. Questions • A firm produces 125 units of a good. Its variable costs are $400 and its total costs are $700 • What are the firm’s fixed costs? • What is the average total cost equal to? • If variable costs were $385 when 124 units were produced, what is the total cost? • What is the difference between average total cost and marginal cost?

  9. Applying Economic Concepts • An airline has 100 seats to sell on a plane. Its sells tickets for $450 each. At this price, 97 are sold. Before the flight takes off, a person says they will buy a ticket on the flight for $150. The marginal cost to the airline is $100. • Is it in the best interest of the airline to sell the person a ticket for $150? Explain.

  10. Activity • Make a list of all the expenses that is incurred by Midlakes School • Which costs are • Fixed • variable

  11. Activity • List problems which effect the environment • Research government programs to address • Evaluate costs and benefits • Propose additional actions

  12. Activity • Compare and Contrast state and federal expenditures • Healthcare • Education • Police force • Welfare

  13. Activity • Personal Budget

  14. Activity • Analyze competing viewpoints about the impact of an increase in minimum wage, a new tax policy, and a change in interest rates on: • Consumers • Producers • Workers • Savers • Investors

  15. Activity • Analyze the political and economic implications of a proposed ban in imported goods

  16. Activity • Interpret and analyze • “Economic Report of the President” • Summarize federal and state expenditures

  17. Stossel

  18. Quiz

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