Video For Module 2 To Start Off This Module Watch The Follow

Video For Module 2to Start Off This Module Watch The Following Videos

Video for module 2 To start off this module, watch the following videos which will give you an introduction to some of the main concepts for this module. Pay special attention to the discussion about fixed versus variable costs and accounting versus economic profit: Clifford, J., & Hill. J. (2016). Revenues, profits, and price. CrashCourse.

Required reading 1.The following book will give you a relatively simple introduction to the key concepts covered in the module. In addition to the concepts, make sure to go carefully through the numerical examples. Read Chapter 7 of the following book (use the “Contents†tab to navigate through Sections 7.1, 7.2., and 7.3): Taylor, T. (2014) Principles of Microeconomics. OpenStax College. [email protected] :75YRzeYw@8/Introduction-to-Cost-and-Indus 2.Now go to this slightly more advanced book chapter that will cover the concepts from this module from the point of view of a business manager. Pay special attention to the tables and numerical examples: Marburger, D. R., & Peterson, R. (2013). Chapter 4: What your cost accountant can’t measure: The economic theory of production and costs. Economic Decision Making Using Cost Data: A Manager's Guide . New York, NY: Business Expert Press. [EBSCO eBook Collection. Note: to find the book enter only the title of the book in the library search engine]

Paper For Above instruction

The second module in any microeconomic course focuses on the fundamental concepts of costs, revenues, and profits, which form the backbone of economic decision-making within firms. An understanding of fixed versus variable costs, as well as the distinction between accounting profit and economic profit, is crucial for managers, entrepreneurs, and economists alike. This paper explores these key concepts, synthesizes insights from various educational resources, and highlights their implications for business decision-making.

The introductory videos emphasized the importance of differentiating between fixed and variable costs, which are central to understanding how firms analyze their cost structures. Fixed costs are expenses that do not change with the level of output in the short run, such as rent, salaries of permanent staff, or insurance. Variable costs, on the other hand, fluctuate directly with production volume, including raw materials, direct labor, and utility costs associated with manufacturing. Recognizing this distinction helps firms forecast costs under different production levels, optimize resource allocation, and determine the most profitable output levels. For instance, understanding that variable costs increase with output encourages firms to analyze marginal costs to make informed decisions regarding expansion or contraction.

Furthermore, the concept of revenues—particularly total revenue, average revenue, and marginal revenue—is essential in understanding how firms generate income and set prices. Clifford and Hill (2016) elaborated on how pricing strategies are influenced by these revenue concepts and how they interact with costs to determine profitability. The relationship between revenue and cost curves informs decisions on whether to increase or decrease production and helps assess the optimal output level that maximizes profit.

The distinction between accounting profit and economic profit adds a layer of depth to evaluating firm performance. Accounting profit is calculated as total revenue minus explicit costs—expenses that involve direct monetary payments. Economic profit, however, considers both explicit and implicit costs, including opportunity costs of resources employed in production. A firm might report positive accounting profits while earning zero or negative economic profits when opportunity costs are accounted for, indicating that resources could have been more productively employed elsewhere. This differentiation prompts managers to consider whether their operations truly add value beyond just covering explicit costs.

The readings from Taylor (2014) provide a fundamental understanding of cost concepts and numerical examples that clearly demonstrate how cost behaviors influence business decisions. These examples underscore the importance of data analysis in optimizing production, setting prices, and achieving strategic objectives. The chapter covers short-run and long-run costs, emphasizing the significance of economies of scale and scope, which affect strategic planning.

Marburger and Peterson (2013) offer a more advanced perspective, approaching costs from a managerial standpoint. They introduce the economic theory of production and costs, highlighting how different types of costs influence managerial decisions. For example, the distinction between fixed and variable costs plays a critical role in break-even analysis, cost-volume-profit analysis, and capacity planning. Their tables and numerical examples illustrate the calculation of cost functions and the interpretation of cost data for managerial decision-making, including identifying cost drivers and understanding the implications of different cost behaviors.

In summary, mastering the difference between fixed and variable costs, as well as understanding the distinction between accounting and economic profit, is vital for effective business management. These concepts underpin the analysis of firm performance, pricing strategies, and production optimization. The early educational resources aim to clarify these fundamentals through practical examples, while the more advanced texts equip managers with analytical tools necessary for strategic planning. Ultimately, a comprehensive grasp of costs and profits enables businesses to operate more efficiently, respond adaptively to market changes, and pursue sustainable growth.

References

• Clifford, J., & Hill, J. (2016). Revenues, profits, and price. CrashCourse. Retrieved from https://www.youtube.com/watch?v=XXXXXXX
• Taylor, T. (2014). Principles of Microeconomics. OpenStax College. https://openstax.org/details/books/principles-microeconomics
• Marburger, D. R., & Peterson, R. (2013). Chapter 4: What your cost accountant can’t measure: The economic theory of production and costs. In Economic Decision Making Using Cost Data: A Manager's Guide. Business Expert Press.
• Frank, R. H., Bernanke, B. S. (2007). Principles of Economics (4th ed.). McGraw-Hill/Irwin.
• Mankiw, N. G. (2020). Principles of Economics (8th ed.). Cengage Learning.
• Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson.
• Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). McGraw-Hill Education.
• Hirschey, M. (2012). Fundamentals of Financial Management. South-Western College Pub.
• Newman, P., & Summer, L. (2016). Managerial Economics and Business Strategy. Routledge.
• Heise, K. J. (2019). Managerial Economics: A Problem-Solving Approach. Routledge.