Week 2 Objective

Week Two Learning Team Deliverable

ECO 561

October 15, 2013

Week Two Learning Team Deliverable

Week two topics gave the members of team B the opportunity to expand on experiences in their lives, both personally, and professionally. The terms discussed in week two gave a foundation for business operation. To achieve simplicity, one must have a true understanding of fixed and variable costs, cost maximization, production levels, and opportunity costs. Team B will discuss the topics for week two and give a brief overview of those topics. In addition, team B will highlight the topics that the team felt comfortable with as well as the topics the team found difficult to understand.

Identify production level to maximize profits

According to McConnell, Brue, and Flynn, “because the purely competitive firm is a price taker, it can maximize its economic profit only by adjusting its output (pg. 179). When the level of output produced causes marginal revenue and marginal cost to be equal, profit maximization is achieved. Team B found this topic to be somewhat confusing. As the team discusses the topics, the team could not come to a clear understanding of profit maximization. This topic is definitely one that we as a team struggled with.

Explain how to balance fixed and variable costs

Fixed cost is the cost that independent of output. These remain constant throughout the relevant range. Fixed costs often consist of rent, buildings, and machinery. Variable cost is cost that varies with output. Normally variable cost increase at a continual rate comparative to labor and capital. Variable cost includes wages, utilities, and materials used in production. From the readings the team could not clearly understand the balancing of fixed and variable cost.

Applying Economic Cost Concepts

Economic decision -making requires the choice of an alternate that can give the most benefit and can cover the cost. Opportunity cost is the “I cannot do without” cost when there are a...