30 Oktober 2007

Saran dan Kritik

 Kalo ada pertanyaan yang aneh gak usah dijawab sekalian soalnya bikin
bingung. (terlalu baik kalo ngejawab…jd pertanyaan nggak penting itu tetep
dijawab dan bikin agak bingung).
 Slidenya pake bahasa indonesia ajah…
 Perbanyak contoh soal dan pembahasannya (memberikan contoh soal UTS
dan UAS)…mahasiswa mengerjakan terlebih dahulu soal-soalnya….
 Ada hiburannya… musik… (humornya ditambah supaya nggak ngantuk)…
 Terlalu cepet ngejelasinnya (kak lebih pelan-pelan ngejelasinnya yah, saya
ngertinya lama..hehe)
 Kakak jangan suka bingung sendiri ya kak…(kebanyakan yang dipikirin…
tidak perlu memikirkan asumsi yang merestriksi kakak berstatement…)…
jawabanya tergantung mulu…
 Lebih santai tetapi serius…( jangan terlalu serius). Jangan terlalu kaku…
 Jangan terlalu lama… efisiensi waktu
 Intonasi nadanya diperjelas…
 Belajar dari hal-hal yang belum dimengerti
 Lebih sistematis…
 Ada sesi pertanyaan ketika asistensi akan berakhir
 Cost of production
Measuring Cost:
Which Costs Matter?

Economic
EconomicCost
Costvs.
vs.Accounting
AccountingCost
Cost
 Accounting Cost
 Actual expenses plus depreciation charges for
capital equipment
 Economic Cost
 Cost to a firm of utilizing economic resources in
production, including opportunity cost

Opportunity cost.
 Cost associated with opportunities that are
foregone when a firm’s resources are not put to
their highest-value use.
 Costs as Opportunity Costs
 A firm’s cost of production includes all the
opportunity costs of making its output of goods
and services.
 Explicit and Implicit Costs
 A firm’s cost of production include explicit costs and
implicit costs.
 Explicit costs are input costs that require a direct outlay
of money by the firm.
 Implicit costs are input costs that do not require an
outlay of money by the firm.
Economic Profit versus Accounting
Profit

 Economists measure a firm’s economic profit as

total revenue minus total cost, including both
explicit and implicit costs.
 Accountants measure the accounting profit as
the firm’s total revenue minus only the firm’s
explicit costs.
 When total revenue exceeds both explicit and
implicit costs, the firm earns economic profit.
 Economic profit is smaller than accounting profit.

 Economic versus Accountants

How an Economist How an Accountant

Views a Firm Views a Firm

Economic
profit
Accounting
profit
Implicit
Revenue costs Revenue
Total
opportunity
costs
Explicit Explicit
costs costs
 The
The Short
Short Run
Run versus
versus the
the Long
Long Run
Run

 Short-run:
 Period of time in which quantities of one or more
production factors cannot be changed.
 These inputs are called fixed inputs.

 Long-run
 Amount of time needed to make all production
inputs variable.
Isoquants

 Assumptions
 Food producer has two inputs

 Labor (L) & Capital (K)

 Isoquants
 Curves showing all possible combinations of
inputs that yield the same output
Isoquants

 Observations:

1) For any level of K, output increases

with more L.

2) For any level of L, output increases

with more K.

3) Various combinations of inputs

produce the same output.
 Production Function for
Food Labor Input

Capital Input 1 2 3 4 5
1 20 40 55 65 75
2 40 60 75 85 90
3 55 75 90 100 105
4 65 85 100 110 115
5 75 90 105 115 120
Production with Two Variable Inputs
(L,K)
Capital
per year 5 E The
TheIsoquant
IsoquantMap
Map

4
The isoquants are derived
from the production
function for output of
3
A B C of 55, 75, and 90.

2
Q3 = 90
D Q2 = 75
1
Q1 = 55
1 2 3 4 5 Labor per year
 Isoquants
Input
InputFlexibility
Flexibility
 The isoquants emphasize how different input
combinations can be used to produce the
same output.
 This information allows the producer to
respond efficiently to changes in the markets
for inputs.
The
TheCost
CostMinimizing
MinimizingInput
InputChoice
Choice

 The Isocost Line

 C = wL + rK
 W: wage (price of labor)
 r = Depreciation Rate + Interest Rate. (user cost or
price of capital)
 Isocost: A line showing all combinations of L & K
that can be purchased for the same cost
Cost in the Long Run
The
TheIsocost
IsocostLine
Line
 Rewriting C as linear:
 K = C/r - (w/r)L
 Slope of the isocost: K
L
 r
w
 is the ratio of the wage rate to rental cost of
capital.
 This shows the rate at which capital can be
substituted for labor with no change in cost.
Choosing Inputs

 We will address how to minimize cost for a

given level of output.
 We will do so by combining isocosts with
isoquants
 Producing a Given
Output at Minimum Cost
Capital Q1 is an isoquant
per for output Q1.
year Isocost curve C0 shows
all combinations of K and L
that can produce Q1 at this
K2 cost level.

Isocost C2 shows quantity

CO C1 C2 are
Q1 can be produced with
three combination K2L2 or K3L3.
isocost lines However, both of these
A are higher cost combinations
K1 than K1L1.

Q1
K3

C0 C1 C2
L2 L1 L3 Labor per year
Input Substitution When
an Input Price Change
Capital If the price of labor
per changes, the isocost curve
year becomes steeper due to
the change in the slope -(w/L).

This yields a new combination

of K and L to produce Q1.
B Combination B is used in place
of combination A.
K2
The new combination represents
the higher cost of labor relative
A to capital and therefore capital
K1 is substituted for labor.

Q1

C2 C1

L2 L1 Labor per year

Cost in the Long Run

 Isoquants and Isocosts and the Production

Function

MRTS  - K  MP L
L MP K

Slope of isocost line  K  w

L r
MPL
and  w
MPK r
Cost in the Long Run

 The minimum cost combination can then be

written as:

MP L  MP K
w r
 Minimum cost for a given output will occur when
each dollar of input added to the production
process will add an equivalent amount of output.
Cost in the Long Run

 Cost minimization with Varying Output

Levels
 A firm’s expansion path shows the minimum cost
combinations of labor and capital at each level of
output.
A Firm’s Expansion Path
Capital
per The expansion path illustrates
year the least-cost combinations of
labor and capital that can be
used to produce each level of
150 $3000 Isocost Line output in the long-run.

$2000 Expansion Path

Isocost Line
100
C
75
B
50
300 Unit Isoquant
A
25
200 Unit
Isoquant
Labor per year
50 100 150 200 300
The Inflexibility of
Short-Run Production

Capital E
per The long-run expansion
year path is drawn as before..
C

Long-Run
Expansion Path
A

K2
Short-Run
P Expansion Path
K1 Q2

Q1

L1 L2 B L3 D F
Labor per year
End of today
Thx…