6.1 Learning Outcomes

1. Explain the difference between explicit and implicit costs

2. Explain the difference between the short run and the long run

3. Explain the difference between variable and fixed costs

4. Apply the Principle of Diminishing Returns

5. Define economic cost and economic profit

6. Provide examples of production costs.

7. Evaluate a company’s cost structure

8. Recognize how changes in economic conditions affect a company’s profitability

6.2 Action Required:

Reading

Read the following to prepare for this week:

• Survey of Economics, Chapter 5: Production Technology and Cost

Video:

MIT OpenCourseWare video lecture series, “Productivity and Costs”)

Watch the following video(s), which you can access in the Weekly Media object or by clicking on the link(s) below: and answer the question.

http://www.youtube.com/watch?v=Q4iKuKAjzK0&list=SP61533C166E8B0028&index=10

6.3 Test your Knowledge (Question):

Q: Referring to the video lecture, an economist, Malthus has predicted that the production of food will slow down because of the diminishing marginal product of labour without increasing capital. So, a continuous increase in demand due to an increase in world population someday may result in mass starvation. Now world population has increased by more than 800%, and there is no mass starvation as predicted.

Discuss what did Malthus get wrong?

6.4 Instructions

• Answer the question in the test your knowledge section.
• Post your answer on the discussion board using the discussion link below (Week5: Interactive learning Discussion)