ECON 1051 1nd Edition Lecture 25 Outline of Last Lecture I. The Financial Crisis of 2007-2009II. Did Principal-Agent Problems Help Bring on the Financial Crisis?a. Investment banksb. Glass-Steagall Act Outline of Current Lecture I. Overview II. The Short Run and Long Run in Economics III. The Difference Between Fixed Costs and Variable Costs IV. Implicit Costs vs. Explicit Costs Current LectureI. Overviewa. The basic activity of a firm is to use inputs, such as workers, machines, and natural resources, to produce outputs of goods and servicesb. Technologyi. The processes in a firm used to turn inputs into outputs of goods and services c. Technological change i. A change in the ability of a firm to produce a given level of output with a given quantity of inputs II. The Short Run and Long Run in Economics a. Short run i. The period of time during which at least one of a firm’s inputs is fixedb. Long run i. The period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plantIII. The Difference Between Fixed Costs and Variable Costsi. Total cost 1. The cost of all the inputs a firm uses in production ii. Variable CostsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.1. Costs that change as output changesiii. Fixed costs1. Costs that remain constant as output changesiv. Putting it all together:1. All of a firm’s costs are either fixed ore variable, so we can state the following:a. Total cost = fixed cost + variable cost b. TC = FC + VCIV. Implicit Costs vs. Explicit Costsa. Opportunity Costi. The highest-valued alternative that must be given up to engage in an activity b. Explicit Costi. A cost that involves spending moneyii. Sometimes called accounting costsc. Implicit Costi. A nonmonetary opportunity cost ii. Economic cost includes both explicit and implicit
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