I agree the manufacturing cost of the product is driven by the recurring cost of procuring the materials to fabricate it. For example, printed wiglets are manufactured to be dominated by material costs. (1) do something with the marginal benefits > meaning marginal costs of doing it. (2) start doing something when the marginal benefits = marginal cost of doing it. (3) never do something when the marginal benefits < marginal costs of doing it.
It can be easy wrongly conclude that marginal cost and total cost of the teams should always move in the same direction. That is, it total cost is rising, the marginal cost must be falling as well. To maximize the profit using marginal revenue and marginal cost, you focus on the contribution one additional unit of output makes the revenue relative to its contribution to the cost.
DISCUSSION 3 WEEK 3 ECO
I agree U.S. Postal Service face a lot of competition because they are not the only firm in its industry.
Firms are brought into existence by people in order to produce things. Economists assume that the overriding goal of all corporations is to make as big a profit possible. They make the assumptions: for example, if you ask around, profit maximization is near the top of every firm's to do list. No matter what other goals a firm may have, it still wants to maximize profits after taking steps to achieve those other goals. For instance, a firm that wants to have a factory that emits no greenhouse gases still, after it builds such a factory, wants to make as much money as possible. I think a lot of non-economics object to people's earning profits, but profits ensure that firms receive the crucial contributions of entrepreneurship. This is a factor of production, along with labor, land and capital. We could think of someone who has the opportunity to start her own business. She could keep working for someone else and receive steady wages. We have to ask, “ what is her incentive to strike out on her own and risk staring a business that may fall?” The incentive is that she will receiver the profits if the business does well. Without potential profits, no one would risk leaving a safe job in order to innovate, and also consumers as a whole would be hurt because the supply of great new products and services would come to a halt.
DR. SU SUNKCOST
The economists refer to costs that have already been incurred and which should therefore not affect the current and future decision-making as sunk costs. Rationally speaking, we should consider only the future, potential marginal costs and benefits of the current. For example, suppose that we just spent $15 to get into an all-you-can-eat Sushi restaurant. How much should you eat? More specifically, when deciding how much to eat, should we care about how much we paid to get into the restaurant? To an economist, the answer to the question is eat exactly the amount of food that makes you most happy. And the answer to the second question is how much it cost you to get in doesn't matter whether you eat 1 piece of Sushi or 80 pieces of Sushi; the cost was the same, but differently, because the cost of getting into the restaurant is now in the past. It should be completely unrelated to the current decision of how much to eat. After all, if we were suddenly offered $1,000 to leave the Sushi restaurant and eat next door at a competitor's; we would have to ask ourselves, would we refuse simply because we felt like we had to eat a lot at the Sushi restaurant in order to get our money's worth out of the $15 we spent? Of course not. Unfortunately, most people tend to let sunk costs affect their decision making until an economist points out to us that sunk costs are irrelevant.
DISCUSSION 2 WEEK 3 ECO
I agree sprinting to maximum short run profits is a great idea. Given the perfectly competitive firm is a price taker, the firm supply determines the quantity of output to produce in order to