Ways and factors to minimize production costs presentation. Presentation on the topic "production costs and production costs". Functions of the Central Bank

Transaction costs Transaction costs, or interaction costs, are associated with making transactions or exercising property rights. The process of interaction between subjects requires huge expenses for finding business partners, concluding contracts, protecting property rights, etc.

Accounting Costs Accounting costs are the cost of resources used by a firm at their actual acquisition prices. These are the costs incurred by the firm. Money for the purchase of raw materials, materials, payment of wages, rent, depreciation of equipment, interest on a loan, etc. Accounting costs are past costs.

Opportunity costs (lost profits) Despite the importance of the costs of past periods for the economic evaluation of the company's activities great importance have future costs ( opportunity cost). Opportunity costs are the costs associated with the failure to use certain alternatives of using resources to achieve the intended goals. The existence of opportunity costs is associated with limited resources.

Explicit and implicit (opportunity costs) Explicit costs are costs that take the form of cash payments to resource owners. They are determined by the amount of expenses of the firm for the purchase of factors of production. Implicit costs are the opportunity costs of using resources that are owned by the firm (such as land, equipment, and entrepreneurial talent) and take the form of forgone income due to their exploitation by the firm itself.

Accounting and economic costs Accounting costs = Explicit costs; Economic costs = Explicit costs + Implicit costs. In decision making, only economic costs matter. Their opposite is sunk costs.

Calculation of accounting and economic costs Name of costs Accounting costs Economic Wages of employees Interest payment Depreciation Other costs (raw materials, etc.) Implicit earnings of the farmer Implicit earnings of the wife of the farmer Implicit land rent Implicit % on capital TOTAL

Returnable and Sunk Costs Returnable costs are costs that a firm is able to recoup after going out of business. Sunk costs are expenses that the company is not able to recover in the event of termination of activities (the cost of registering a company, obtaining a license, etc.) Sunk costs do not have alternative uses and therefore are not included in opportunity costs and are not taken into account in decision making.

TC, then the firm earns savings" title="(!LANG:Normal profit Normal profit is the income from the use of entrepreneurial talent. Normal profit occurs when the firm's total income = total economic costs (TR = TC). If TR > TC, the firm gets savings" class="link_thumb"> 15 !} Normal profit Normal profit is the income from the use of entrepreneurial talent. Normal profit occurs when the firm's total revenue = total economic cost (TR = TC). If TR > TC, then the firm earns economic profit. TC, then the firm earns savings"> TC, then the firm earns economic profit."> TC, then the firm earns savings" title="(!LANG:Normal Profit Normal profit is income from the use of entrepreneurial talent. Normal profit occurs when firm's total revenue = total economic cost (TR = TC) If TR > TC, then the firm gets savings"> title="Normal profit Normal profit is the income from the use of entrepreneurial talent. Normal profit occurs when the firm's total revenue = total economic cost (TR = TC). If TR > TC, then the firm gets savings"> !}

Short run cost of production B short term part of the resources remains unchanged, and part changes with a change in the volume of production. In accordance with this, the economic costs of the short-term period are divided into fixed and variable.

P - the firm is making a loss. If P > AVC, the firm should continue production; If P " title="(!LANG: Average cost and profit of the firm If ATC = P - the firm operates at normal profit; If ATC P - the firm suffers losses. If P > AVC - the firm should continue production; If P" class="link_thumb"> 21 !} Average costs and profit of the firm If ATC = P - the firm operates with a normal profit; If ATC P - the firm suffers losses. If P > AVC, the firm should continue production; If P = AVC - the firm is indifferent to continue or stop production; If P P - the firm suffers losses. If P > AVC, the firm should continue production; If P "> P - the company suffers losses. If P> AVC - the company should continue production; If P = AVC - the company does not care to continue or stop production; If P P - the company suffers losses. If P> AVC - the company should continue production; If P " title="(!LANG: Average cost and profit of the firm If ATC = P - the firm operates at normal profit; If ATC P - the firm suffers losses. If P > AVC - the firm should continue production; If P"> title="Average costs and profit of the firm If ATC = P - the firm operates with a normal profit; If ATC P - the firm suffers losses. If P > AVC, the firm should continue production; If P">!}

AVC 1.5 > 1.4 - AFC = 0.2 the firm should TR=PxQ = 1.5x100=150 thousand continue The firm has decided to produce. discontinuation" title="(!LANG:Business Problem Example: Analysis: Q = 100k ATC = 160: 100 = 1.6 P = 1.5 AVC = 1.6 – 0.2 = 1.4 TC = 160 thousand P > AVC 1.5 > 1.4 - AFC = 0.2 the company should continue TR=PxQ = 1.5x100=150 thousand" class="link_thumb"> 22 !} Business Problem Example: Analysis: Q = 100k ATC = 160: 100 = 1.6 P = 1.5 AVC = 1.6 – 0.2 = 1.4 TC = 160k P > AVC 1.5 > 1.4 - AFC = 0.2 the firm should TR=PxQ = 1.5x100=150 thousand continue The firm has decided to produce. termination of production. AVC 1.5 > 1.4 - AFC = 0.2 the firm should TR=PxQ = 1.5x100=150 thousand continue The firm has decided to produce. termination of production"> AVC 1.5 > 1.4 - AFC = 0.2 the company should continue TR=PxQ = 1.5x100=150 thousand. The company has decided to discontinue production."> AVC 1.5 > 1, 4 - AFC = 0.2 the firm should TR=PxQ = 1.5x100=150 thousand continue The firm has decided to produce. discontinuation" title="(!LANG:Business Problem Example: Analysis: Q = 100k ATC = 160: 100 = 1.6 P = 1.5 AVC = 1.6 – 0.2 = 1.4 TC = 160 thousand P > AVC 1.5 > 1.4 - AFC = 0.2 the company should continue TR=PxQ = 1.5x100=150 thousand"> title="Business Problem Example: Analysis: Q = 100k ATC = 160: 100 = 1.6 P = 1.5 AVC = 1.6 – 0.2 = 1.4 TC = 160k P > AVC 1.5 > 1.4 - AFC = 0.2 the firm should TR=PxQ = 1.5x100=150 thousand continue The firm has decided to produce. termination of production"> !}

Marginal cost Marginal cost (MC) is the additional cost that a firm incurs when changing production per unit of output. According to the discrete marginal cost formula: MC = TC/Q = VC/Q; According to the continuous marginal cost formula: MC = TC(Q) = VC(Q). Marginal cost is the amount that a firm can directly control in producing one additional unit of output.

Costs in long term In the long run, all resources are variable, so all costs are variable. Union of curves short term costs, providing optimal production volumes for each output volume, show the firm's long-run average cost curve - LATC.

Shape of LATC curves In the long run, the shape of LATC curves is determined by economies of scale. Positive economies of scale occur when ATCs decrease as output increases. The negative effect of scale of production implies an increase in ATC as output increases.

Coefficient of elasticity of production in terms of costs The quantitative indicator of the effect of scale in production is the coefficient of elasticity of production in terms of costs - Ec. Ес shows the percentage change in ATC with a change in output by 1%: Ес = МС/АТС If Ес = 1, i.e. MC = ATC, then there is a constant economies of scale; If Ec 1, then - a negative scale effect. 1, then there is a negative scale effect.">

Business Problem: Using LATC to Make Volume Decisions Q LTC LMC LATC A .0 5.00 B .0 4.50 C .0 4.00 D .0 3.75 E .0 4.00 F .0 4 .33

Conclusions from the table It can be seen from the data in the table that options A,B,C,D exhibit positive economies of scale, and options E, F- negative scale effect. If the firm chooses option A, then the lowest ATC will be = 5. If the firm chooses option C, then due to economies of scale, the potential for reducing ATC becomes significant, ATC = 4.

Productivity Curve A productivity curve is a line that shows the relationship between labor costs and additional units of output. Its negative slope indicates that unit incremental costs decrease as output increases because workers improve their skills.

Numerical example of a productivity curve unit Unit units of labor Cumulative working time Aggregate average working hours Unit labor costs Aggregate average labor costs,0 7855.1 6682.4 5575,

slide 1

FIXED AND VARIABLE COSTS
Social studies Grade 11 Basic level
Social science codifier Chapter 2. Economics. Topic 2.5
The presentation was prepared by Ol'eva Olga Valerievna, teacher of history and social studies, GBOU School No. 1353

slide 2

FIRM (enterprise) - commercial organization acquiring economic resources for the production and sale of goods and services for profit. Firms are engaged in collective (organized) entrepreneurship.
ENTERPRISE - an economic agent that owns property, produces goods and services, has income and expenses.
COLLECTIVE (LLC, JSC)
INDIVIDUAL (CHP, PBOYUL)

slide 3

The firm is a LEGAL ENTITY. SIGNS: must have founding documents(usually this is the charter), the location and the executive body. has separate property (limited property liability, unlike an individual entrepreneur) is liable for its obligations with this property has property rights and obligations can be a plaintiff and defendant in court (as well as an individual) has an independent balance sheet (estimate) and its own current account
ENTITY

slide 4

ECONOMY OF THE COMPANY
THE MAIN FUNCTION OF THE FIRM is to produce goods and services to meet consumer demand. FACTORS OF PRODUCTION - resources necessary for the production of goods and services:
LABOR is an expedient human activity to create economic benefits. CAPITAL (investment resources) - all the benefits created by a person's past labor used for business. The capital also includes raw materials (oil, gas, timber, etc.). LAND - all agricultural and urban land that is used for agriculture or industrial development. INFORMATION - any information necessary for the organization and conduct of production. MANAGEMENT (entrepreneurial) abilities - the ability of an employee to use his knowledge to make the best decision in the circumstances.

Slide 5

PRODUCTION COSTS -
the costs of the producer (owner of the firm) for the acquisition and use of factors of production.
When will the firm be profitable?


REVENUE FROM SALES OF PRODUCTS
COSTS OF ACQUISITION AND USE OF FACTORS OF PRODUCTION
REVENUE FROM SALES OF PRODUCTS
COSTS OF ACQUISITION AND USE OF FACTORS OF PRODUCTION
PROFIT

slide 6

PLACE OF PROFIT IN THE STRUCTURE OF THE COST OF THE GOODS
COST OF GOODS (REVENUE)
COST LEVEL
PRICE LEVEL
amount social labor and the time required to produce the product. It consists of the value of constant capital, the value of variable capital of surplus value.
the amount of money in exchange for which the seller is willing to transfer (sell) a unit of goods. In essence, the price is the coefficient of exchange of a particular commodity for money.
COST OF GOODS -
THE PRICE OF THE PRODUCT -

Slide 7

Slide 8

ECONOMIC AND ACCOUNTING COSTS
ECONOMIST AND ACCOUNTANT CALCULATE PROFIT DIFFERENTLY

Economy

Permanent and variable costs irreversible costs. The main sources of business financing. Shares, bonds and other securities. Banking system. Financial institutions. Types, causes and consequences of inflation.

Rukavishnikova M.V., teacher of history and social studies. Social studies grade 10 basic level

Fixed and variable costs.

Production costs and economic costs.

Internal and external.

Constants and variables.

The concept of profit.

economic profit.

accounting profit.

Features of calculating the value of costs and profits.

accounting method.

economic method.

• production costs- this is the cost of the producer (owner of the firm) for the acquisition and use of factors of production.

• economic costs- these are the payments that the company must make to suppliers of the necessary resources (labor, material, energy, etc.) in order to divert these resources from use in other industries.

economic costs

Internal (implicit)

Permanent

Variables

• Internal (or implicit)- the cost of one's own resource - equal to the cash payments that could be received for an independently used resource if its owner invested it in someone else's business - unpaid expenses for the use of one's own resources. The resources belong to the company and are used for its own needs. Have the form of "lost income" (for example: office and warehouses) – rent (alternative usage) would give a profit in monetary terms.

• External (explicit, accounting)- payments to suppliers labor resources, raw materials, fuels, services, etc. - The amount of cash payments that the firm makes to pay for the necessary resources ( wages, purchase of raw materials, transportation costs) are calculated on the basis of financial statements-accounting.

• fixed costs- that part of the total costs that does not depend at a given point in time on the volume of output ( the rent of the company for the premises, the cost of maintaining the building, the cost of training and retraining of personnel, wage management personnel, expenses for utilities, depreciation ). Occur when production has not yet begun, because. there must be a building, cars, etc. They are financed even when the enterprise stops.

• variable costs- that part of the total costs, the value of which for a given period of time is directly dependent on the volume of production and sales of products ( purchase of raw materials, wages, energy, fuel, transport services, costs for tare and packaging, etc. . ). if the products are not produced, they are equal to zero.

Profit

• economic profit is the difference between the firm's total revenue and economic costs.

• Economic profit directs the entrepreneur not just to earning income, but to compare this income with that which could be obtained as a result of an alternative use of available resources.

• Accounting profit is the difference between total revenue and accounting costs.

• Different understanding of the company's profit by economists and accountants leads to different conclusions about the state of affairs in the enterprise.

• To calculate the actual value of costs and profits, the accounting method should be used. For making decisions on the choice of one of the alternative options for investing resources, only economic method cost calculation.

Money- this is a special product that performs the role of a universal equivalent in the exchange of goods. It expresses the value of all goods and acts as an intermediary in their exchange.

The main functions of money (essence of money):

• the measure of value- express the price - the monetary form of the value of the goods;
• medium of exchange- act as a fleeting intermediary in the acts of sale of goods;
• store of value- withdrawn from circulation money is used as a store of value ( gold, securities, real estate, currency, etc.)
• instrument of payment– are used to pay off various liabilities ( wages, taxes, etc.)
• world money - used for settlements in the world market ( gold, dollar, euro, pound sterling, yen, ruble) as a universal means of payment and purchase, and also as a universal materialization of wealth.

Cash(paper money and small change) - a form of making cash payments and settlements, in which banknotes are physically transferred from the buyer to the seller when paying for goods or when making other payments.

Non-cash funds(credit money, check, bill of exchange, banknotes, electronic money) - a form of cash payments and settlements in which the physical transfer of banknotes does not occur, but records are made in special documents

• credit money- these are debt obligations, the appearance of which is associated with the development of credit relations;
• check- a written order of a person who has a current account on the payment by the bank of a sum of money or its transfer to another account;
• bill of exchange- a written promissory note, which indicates the amount of money and the timing of its payment by the debtor; It is in circulation as money.
• banknotes- Bank notes - bank notes issued into circulation by central issuing banks. From paper money differ in that: they have double security - credit (commercial bill) and metal (gold reserves of the bank); are issued not by the state, but by the central issuing bank; function as a means of payment.
• electronic money is a system of non-cash payments made through the use of electronic technology, covering banks, enterprises retail, household services etc. Smart cards appeared, which are an electronic checkbook

The financial market consists of a number of sectors

• Credit market. This is an economic space where relations are organized due to the movement of free money between borrowers and lenders on the terms of repayment and payment ( Central bank is a commercial bank, commercial banks, banks and individuals and legal entities, Russian and foreign banks).
• Currency market. System economic relations between banks, as well as between banks and their clients regarding the purchase and sale of foreign currency.
• Stocks and bods market ( stock market) . A market where the issue (release) and purchase and sale of securities, shares, bonds and derivatives of them is carried out.
• Market of insurance and pension products. This is a special system of organization of insurance relations, in which the purchase and sale of insurance services as a commodity takes place, the supply and demand for them is formed. The insurer and the policyholder regulate insurance economic relations by a special agreement - a policy.
• Investment market ( investment market ). This is a set of economic relations that develop between sellers and buyers of investment goods and services. Objects are goods investment activity (real estate, new construction, art values, precious metals and products, deposits, government obligations).

Stock Exchange is an organized market in which transactions with securities and other financial instruments are carried out and whose activities are controlled by the state.

Stock exchange functions

• Mobilization of funds for long-term investments in the economy and financing of government programs.
• Purchase and sale of shares, bonds joint-stock companies, government bonds and other securities.
• Establishment in the course of trading of the rate of securities circulating on the stock exchange.
• Dissemination of information about securities quotes and the state of financial market generally.

Bank(it. bench) is financial institution, which concentrated temporarily free funds of enterprises and citizens for the purpose of their subsequent provision in debt or on credit for a certain fee.

Bank functions

• acceptance and storage of deposits (money or securities deposited in the bank) of depositors;
• issuance of funds from accounts and settlements between clients;
• placement of collected funds by issuing loans or providing credits;
• purchase and sale of securities, currency;
• regulation of money circulation in the country, including the issuance (issue) of new money (function only Central Bank).

Central State Bank- pursues the state policy in the field of issue, credit, money circulation. home credit organisation country, is owned by the Russian Federation. Operates on the basis of the law of the Russian Federation.

Commercial banks- carry out financial and credit operations on a commercial basis.

• According to the form of ownership, they are divided into state, municipal, private, joint-stock, mixed.
• On a territorial basis, they are divided into local, regional, national and international.

Functions of the Central Bank

• Emission center of the country (only it has the right to issue money, banknotes into circulation).
• Regulates the economy through monetary policy.
• It concentrates the minimum reserves of commercial banks, which gives it the opportunity to control their activities.
• He is the banker of the government (he gives all profits in excess of certain norms to the treasury and is an intermediary in all payments, therefore he occupies a leading position in the country's banking system).

The main instruments of the state's monetary policy

• Operations on open market (government loan)
• Discount rate policy
• Change in the required reserve ratio

• Internal. External.
• Internal.
• External.

Internal sources of financing.

• Firm profit. Depreciation.
• Firm profit.
• Depreciation.

• Bank loan. Transformation of a sole proprietorship into a partnership. Transformation of the partnership into a joint stock company. Use of funds from various funds to support small businesses.
• Bank loan.
• Transformation of a sole proprietorship into a partnership.
• Transformation of the partnership into a joint stock company.
• Use of funds from various funds to support small businesses.

All sources of financing in business can be divided into internal and external.

• – sources available to the firm. This is the company's profit + depreciation.
• External - bank loans + funds of various financial institutions and investment companies, pension funds + state and regional small business support funds.

Domestic funding sources

Profit- main internal source firm financing.

Firm profit is the difference between income and its costs or the cost of the product.

The amount of profit depends

• From commodity prices .
• From unit costs .
• From the volume of sales of products .

• Gross or total profit- the difference between income and product cost. Part of it goes to pay taxes, perhaps it will be paid to the bank in the form of interest.

• Residual or net income- the amount remaining after deducting the transferred payments from the gross profit.

Depreciation (from lat. amortisatio - repayment) –1) calculated in monetary terms depreciation of fixed assets in the process of their use, production use.

2) It is at the same time a means, a method of transferring the value of worn-out instruments of labor to the product produced with their help.

3) the institution of compensation for depreciation of fixed assets is depreciation deductions in the form of money allocated for the repair or construction, production of new fixed assets.

Sinking fund- funds intended for the reproduction, reconstruction of worn-out fixed assets. The amount of ready depreciation deductions of an enterprise, organization is determined as a share of the initial cost of objects representing fixed assets. The normative value of this share is called the depreciation rate.

External sources funding

• Other firms.
• Sale of shares
• Banks
• Credit
• Trade(or commodity) credit

State

• The state allocates funds to public sector enterprises in the form of direct capital investments .
• The state can also provide firms with its funds in the form of subsidies .
• Main difference public funding from a bank loan that the company receives funds from the state free of charge and irrevocably. This means that the firm does not have to return the amount received from the state, and does not have to pay interest on it.
• Government order .

Homework

§ 12, test, notes in a notebook. Block "Financial institutions" complex plan

slide 1

Production Costs and Profit Costs do not exist by themselves. They always appear when there is a desire to achieve a result. Therefore, it is not the absolute level of costs that is important, but the ratio between efforts and the result obtained. Peter Drucker

slide 2

PRODUCTION COSTS are the costs associated with the production and circulation of goods produced. in accounting and statistical reporting reflected in the form of cost. Include: material costs; labor costs; interest on loans; costs associated with the promotion of goods on the market and its sale. *

slide 3

slide 4

EXPLICIT COSTS are opportunity costs that take the form of cash payments to owners of production resources and semi-finished products. They are determined by the amount of the company's expenses to pay for the purchased resources (raw materials, materials, fuel, labor, etc.). *

slide 5

IMPLICIT COSTS are the opportunity costs of using the resources owned by the owners of the firm (or the property of the firm as legal entity) that are not received in exchange for explicit (cash) payments. For example: lost profits when you refuse to rent out your own buildings. !!! In accounting, implicit costs are not reflected. *

slide 6

ACCOUNTING AND ECONOMIC UNDERSTANDING OF COSTS For an accountant, there is a fundamental difference between the purchased and non-purchased (own) resources of the company, since the former are paid from the company's funds, and the latter are not. For the economist, there is no such distinction, since both purchased and non-purchased resources used by a given firm are equally diverted from the production of other goods and services. Therefore, economic costs include not only explicit (external) costs, but also implicit (internal) costs. *

Slide 7

DIVISION OF COSTS INTO FIXED AND VARIABLES!!! It must be remembered that the division into fixed and variable costs exists only in the short term, i.e. when the capital stock of the firm is unchanged. *

Slide 8

FIXED COSTS FC (fixed costs) are the costs that the firm incurs regardless of the volume of output. Their value is unchanged, because they are related to the very existence of the enterprise (with the amount of fixed capital) and must be paid even if the firm does not produce anything. For example: depreciation, rent of premises, property tax, wages and insurance of the administrative and economic apparatus. *

slide 9

VARIABLE COSTS VC (variable costs) are costs that change in proportion to the volume of output. Variable costs include piecework wages for workers, raw materials, supplies, process fuel, electricity, etc. *

slide 10

VARIABLE COSTS Starting from zero, as production grows, they grow very quickly. Then, with a further increase in production volumes, the economy factor in mass production begins to affect, and the growth variable costs becomes slower than the increase in output. In the future, the law of diminishing productivity comes into play, variable costs again begin to overtake production growth. *

slide 11

GROSS COSTS TC (total costs) - represent the sum of fixed and variable costs at each specific level of production. TC = FC +VC On the graph, the summation of VC and FC means an upward shift of the VC line by the OF value along the y-axis. *

slide 12

Average cost is the cost per unit of output. 1. 2. 3. ATC = TC/Q = FC/Q + VC/Q = AFC + AVC !!! With a certain degree of assumption, ATC can be considered the cost of production. *

slide 13

VALUE OF AVERAGE COSTS AFC - with the expansion of production, they are constantly decreasing; AVC - first fall, reach its minimum, and then begin to rise. This means that with a small volume of production, the process will be expensive and inefficient; ATC - depends on the average fixed and average variable costs. MIN ATC is called the optimum cost. *

slide 14

DYNAMICS OF AVERAGE COSTS characterizes the position of the company in the market, but does not determine the supply line and the point of optimal production volume. Point M is not always the point of optimal output where the firm reaches its equilibrium. The manufacturer is not interested in profit per unit of output, but in the maximum of the total mass of profit received. The average cost line does not show where this maximum is reached. *

slide 15

MARGIN COSTS MC (margin costs) are the additional costs of producing each next unit of output in excess of the available volume, i.e. the amount by which total cost increases when output increases by one unit. MC = (TC2 – TC1)/(Q2 – Q1) = ∆TC/∆Q *

slide 16

RELATIONSHIP OF MC AND ATC The marginal cost curve depends only on the size of variable costs. The curve of average gross costs also takes into account the influence of fixed costs. First marginal cost are reduced, remaining below average costs. This is explained by the fact that if the cost per unit of output decreases, then each subsequent product is cheaper than the previous ones. The subsequent increase in marginal cost means that each subsequent unit of output becomes more and more expensive, i.e. marginal cost is higher than the prior average cost. The line of average costs crosses the line of marginal costs at its minimum point M. *

slide 17

RELATIONSHIP BETWEEN MC AND MARKET PRICE * As long as marginal cost is below the market price, production is profitable. When they start to exceed the price, this is a symptom of reduced efficiency. The production of an additional unit of output brings additional costs and additional profit (additional income). The value of this additional, or marginal revenue (MR) is the difference between the proceeds from the sale of n and n-1 units of production: MR = TRn - TR n-1

slide 18

RATIO OF MARGINAL COST AND AVERAGE TOTAL COST The marginal cost curve does not depend on fixed costs, because fixed costs exist whether or not an additional unit of output is produced. First, marginal cost is reduced, remaining below average cost. This is explained by the fact that if the costs per unit of production decrease, therefore, each subsequent product costs less than the average costs of previous products, i.e. average cost is higher than marginal cost. * A subsequent increase in average cost means that marginal cost becomes higher than the previous average cost. Thus, the marginal cost line intersects the average cost line at its minimum point M.

slide 19

RELATIONSHIP OF MARGINAL COSTS AND MARGINAL INCOME With an increase in production, the marginal cost curve (MC) goes up and crosses the horizontal line of marginal income equal to the market price P1 at point M, corresponding to the volume of production Q1. Any deviation from this point results in losses for the firm, either in the form of direct losses with more output, or as a result of a reduction in the mass of profits with a decrease in output. *

slide 20

OPTIMUM PRODUCTION The firm will expand its output until each additional unit produced generates additional profit. Those. as long as marginal cost is less than marginal revenue the firm can expand production. If marginal cost exceeds marginal revenue, the firm will incur losses. MS=MR. *

slide 21

PROFIT AND ITS FUNCTIONS excess in monetary terms of income (revenue from goods and services) over the costs of production and marketing of these goods and services. Profit functions: Reflects the final financial results; Has a stimulating function (used to finance the expansion of production capacity, scientific, technical and social development enterprise, material incentives for its employees); Income taxes are used to finance various social needs, the state performs its functions, the implementation of state investment, production, scientific and technical and social programs which is important for all members of society. *

slide 22

ACCOUNTING PROFIT is the difference between the selling price (sales proceeds) and accounting (explicit) costs. Revenue – Explicit Costs = Accounting Profit *

slide 23

ECONOMIC PROFIT takes into account incremental costs such as unreimbursed own costs entrepreneur, not included in the cost, including “lost profits”, the cost of “stimulating” officials, additional bonuses to employees. Explicit (accounting) costs + Implicit (lost opportunities) costs \u003d Economic costs Income - Economic costs \u003d Economic profit ceteris paribus), we are dealing with two equivalent alternatives If Economic profit< 0, то вид деятельности (при прочих равных условиях) предприятием выбран неправильно. *