Core-010 Costs of Production
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About Core-010 Costs of Production
About the Teacher
Jay Moulton
Jay Moulton is a business veteran. In short:
- Corporate finance and turnaround expert in U.S. and Canada
- CEO or operator of numerous companies in many industries
- 30 years of actually applying business economics principles
- Successfully led and invested in several leveraged buyouts
- Director or advisor to 30+ different companies
- Experience in both for-profit and not-for-profit sectors
- Producer of 700 professional videos and several TV shows
- Author of six economics and business strategy books
- Graduate of Harvard Business School MBA program
- Graduate of The Royal Military College of Canada
- Professional electrical engineer
- Governor of the Harvard Club of British Columbia
Costs of Production
MODULE 1
Every business needs to understand its costs of production to operate efficiently and effectively maximize profit. This can become complicated, because there are several ways that firms measure and categorize costs in their decision-making processes.
Costs of Production
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Learning Objectives - Costs of Production
The video uses cupcakes to demonstrate costs of production. In this video, she explores total costs, fixed costs, variable costs, average costs and marginal costs.
Total Cost is the all inclusive cost of producing a given quantity of a product. Mathematically, Total Cost is the sum of all Total Fixed Costs and all Total Variable Costs.
Average cost is the cost of producing one unit of output. The formula to calculate this is total cost of production divided by quantity produced.
Marginal Product
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In this lesson, you will learn to: Describe the concept of opportunity costs using the examples of guns and butter.
The video explores the limits to production in a restaurant. As restaurant workers are added, the workers' output is plotted and production rates of meals are calculated.
Using the number of meals prepared in a restaurant with limited space as our example, the production curve is plotted.
The video uses the capital investment and addition of labor by a hot dog producer, to identify diminishing marginal product – a measure that is essential to the calculation of the efficient level of production.
Marginal Cost and Average Fixed Cost
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Learning Objectives - Marginal Cost and Average Fixed Cost
The video explains how marginal cost is calculated. He uses iTunes to illustrate how a company selling a product that, effectively, has no marginal cost can succeed by selling large quantities at low prices and create happy customers.
Marginal cost is the additional cost that a firm incurs when it produces one more unit of a good. Mathematically, marginal cost is equal to the change in total cost divided by the change in quantity.
If it costs $20 to produce a quantity of ten goods and it costs $22 to produce 11, then the marginal cost is the change in cost of $2 divided by the change in quantity which is one. The marginal cost is $2.
Economies of scale can have a dramatic effect on prices.
Declining Average Cost
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Learning Objectives - Declining Average Cost
The video reviews how a producer's increasing quantity produced causes average costs to decline. Using the example of a toilet paper manufacturer, Dr. Gajanan shows how the fixed cost of a machine is spread over total volume produced.
Exploring the details of declining average cost.
Learning Objectives - Declining Average Cost
This assessment will test your knowledge of Public Goods.
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