Chapter 13 Journal

Chapter 13 discusses the many different costs of production for firms. The goal of any firm is to maximize their profit, which is calculated by their total revenue minus their total cost. When analyzing a firm’s decision making, it is important to include all the different opportunity costs of production. Some of the opportunity costs, such as the wages a firm pays its workers, are explicit because you are actually able to see the money go out of the bank account  Other opportunity costs, such as the wages the firm owner gives up by working in the firm rather than taking another job, are implicit.  A firm’s costs reflect its production process. A typical firm’s production gets flatter as the quantity of input increases, displaying the property of diminishing marginal product. As a result, a firm’s total-cost curve gets steeper as the quantity produced rises. A firm’s total costs can be divided between fixed costs and variable costs. Fixed costs are costs that do not change when the firm alters the quantity of output produced. Variable costs are costs that change when the firm alters the quantity of output produced. From a firm’s total cost, two related measures of cost are derived. Average total cost is total coast divided by the quantity of output. Marginal cost is the amount by which total cost rises if output increases by one unit. I would rate this chapter a difficulty rating of 2.5/3 because there's so many new terms/graphs/math equations that it can overwhelm you initially. As we elaborate about the chapter, it should become like second nature.