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COSTS
Remember….
 **Scarcity forces people to make
decisions about how they will use
their resources!!!
 **Economic decision making
requires people to consider all the
costs and benefits of a decision!!
Opportunity Costs… What
You LOST!
 Fixed Costs
 Costs or expenses that are the
same no matter how many
units of are good are produced
 Ex: mortgage payments, rent
 Variable Costs
change
 Costs or expenses that
with the number of products
produced
 These costs increase when
production increases and
decrease when production
decreases
 Ex: wages, raw materials, electricity
bills, water bills
 Total Costs
 - Fixed Costs + Variable
Costs = Total Costs
 Marginal Costs
 The extra or additional cost of
producing
an output
one additional unit of
 Ex: 30 bike helmets= $1500, 31
bike helmets= $1550  marginal
cost= $50
 Marginal Revenue
 the extra revenue that results
from selling one more unit of
an output
 Cost-Benefit Analysis
 - an economic decision making
technique that tells us to choose
an action or make a decision
benefits are greater
than the costs
when the
Technology
 ROBOTICS:
machines perform physical
tasks
 INVENTIONS new goods and services
 INNOVATIONS: improving a good or
service
 AUTOMATION: machines control
production
GROSS DOMESTIC PRODUCT
 the total value, in dollars, of all of the FINAL goods
and services produced IN a country during a single
year; measures the size and success of the
NATION’S ECONOMY.
 the sale of USED goods are NOT included in GDP
 CAPITAL GOODS are not included in GDP
 GDP is an important measure of
STANDARD OF LIVING: the quality of
life based on the possession of necessities
and luxuries that make life easier.
 GDP measures QUANTITY NOT
QUALITY.

Alberta wants to invite her friends over for
dinner, but the only time they can come is
Tuesday night when her favorite show,
Gilmore Girls, is on. She decides to invite her
friends because she would enjoy their
company. Alberta invites seven friends over,
but she needs to know how many are coming
so she’ll have enough food. Alberta is
making spaghetti with meatballs and has to
go to the grocery store no matter how many
friends decide to come.



Alberta’s Opportunity Cost ____________________________________________
Alberta’s Fixed Cost _________________________________________________
Alberta’s Variable Cost _______________________________________________

Jack owns a shoe repair shop. His rent
for the shop is $1500.00 a month. Jack
pays his employees $8.00 an hour and
adds a raise of $.50 for every six months
they have been working at Jack’s Shoes.
Since the weekend is the busiest Jack
has three employees work on Friday and
Saturday and only one employee on
Monday through Thursday.

Jack’s Fixed Cost
_________________________________________________________
Jack’s Variable Cost
_______________________________________________________
Incentive for Workers



Andy’s pool hall is open from 5-10 pm.
Andy is considering extending his store
hours on Friday nights. He hears from
many of his customers that he will have
more business from college students if
he keeps his pool hall open until 2 AM.
Andy is trying to decide if the benefits
outweigh the costs of keeping the store
open.





Andy’s Fixed Cost _
Andy’s Variable Cost
Andy’s Total Cost
Andy’s Marginal Cost
Andy’s Marginal Revenue