Cost Analysis

and Estimation

Chapter 8

10E

MANAGERIAL

ECONOMICS

© 2003 South-Western/Thomson Learning

M A

R K

H

I R

S C

H E

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PowerPoint

Presentation

by

Charlie

Cook

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–2

Short-Run Cost Curves

Figure 8.1

Decreasing cost

increasing cost

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–3

Total Cost Function for a Production System Exhibiting Increasing, Then Decreasing, Returns to Scale

Figure 8.2

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–4

Short-Run Cost Curves for Four Scales of Plant

Figure 8.3

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–5

Long-Run Average Cost Curve as the Envelope of Short-Run Average Cost Curves

Figure 8.4

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–6

Effect of Transportation Costs on Optimal Plant Size

Figure 8.5

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–7

Three Possible Long-Run Average Cost Curves for a Multiplant Firm

Figure 8.6

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–8

Plainfield Electronics: Single Versus Multiplant Operation

Figure 8.7

The more output, the more cost

The more output, stable cost

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–9

Probability Distributions of Demand

Figure 8.8

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–10

Alternative Plants for Production of Expected 5,000 Units of Output

Figure 8.9

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–11

Long-Run Average Cost Curve Effects of Learning

Figure 8.10

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–12

Learning Curve on an Arithmetic Scale

Figure 8.11

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–13

Linear Cost-Volume-Profit Chart

Figure 8.12

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–14

Breakeven and Operating Leverage (Firm A)

Figure 8.13a

20

60

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–15

Breakeven and Operating Leverage (Firm B)

Figure 8.13b

100 60

50

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–16

Breakeven and Operating Leverage (Firm C)

Figure 8.13c

40

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–17

TR/TC TR

TC1

TC2

TVC1

TFC1

TVC2

TFC2

BEP1

BEP2

HIGH DOL

LOW DOL

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–18

Cost and Production Functions

Figure P8.1

Thank You

Managerial Economics 10e © 2003 South-Western/Thomson Learning 8–19