Opportunity cost calculation. How to calculate the opportunity cost of production. Total expenses
In order to calculate how much B can be produced instead of the available 66A, it is enough to recall that the internal opportunity cost of producing one good A in Russia is 0.5 of good B. That is, instead of 66A, Russia can produce 33. As a result, the leftmost point of the CPV has a coordinate of 233 (= 200 + 33). The CPV has a fracture. Note that the resulting segment of the CPV is parallel to the original CPV, since Russia ended trade at this segment and returned to the choice between producing two goods at domestic opportunity cost. Now let's build the US CPV. The USA, starting trading at point 200B, according to the proportion of exchange 1A=1.5B (which is equivalent to the proportion 1B=A), wants to exchange 200B for 133 goods A (= 200 *). Russia has the capacity to supply 133 goods A.
Problem number 142. opportunity cost calculation
At the same time, such a division will allow uniting separate industries and territorial complexes, establishing a relationship between countries. This is the essence of MRI. It is based on the economically advantageous specialization of individual countries in the manufacture of certain types goods and their exchange in quantitative and qualitative ratios. Development factors The following factors encourage countries to participate in MRI:- Volume of the domestic market.
At major countries there is more opportunity to find the necessary factors of production and less need to engage in international specialization.
opportunity cost
In order to trade effectively with another country, a given economy does not need to have a higher productivity in the exchanged good, but it is sufficient to produce it at a lower opportunity cost. This has a huge practical value. For example, the USA is more productive than Ecuador and in production software and in the cultivation of bananas. But this does not mean that the US will not trade any goods with Ecuador.
Important
Because the opportunity cost of bananas is lower in Ecuador, he will specialize in producing and trading bananas. The US, by contrast, has lower opportunity costs of producing software, and will trade it. Thus, each country trades in the product in the production of which resources are used in the most optimal way.
Opportunity cost formula
Attention
Opportunity costs are divided into 2 types: external and internal. External costs are associated with the acquisition of a resource and correspond to the benefit that can be obtained by using the same costs of another alternative resource. Internal costs are due to the use of not attracted, but own resources, which means that the time costs of the company's resources are equal to the benefit that can be obtained from the alternative use of its resources.
Related video Pay attention Fixed costs the company must bear in any case, to a certain extent they are practically independent of production volumes.
Educational materials
Sweden has a comparative advantage in cheese and Portugal in wine. Consequently, when establishing trade relations between these two countries, Sweden will specialize in cheese, and Portugal in wine. Sweden exchanges 3 tons of cheese for 1 ton of wine from Portugal.
In order to produce 3 tons of cheese, Sweden spends 3*20=60 hours. Therefore, to obtain 1 ton of wine from Portugal, she needs to spend 60 hours. But if she wanted to produce wine herself, she would have to spend 100 hours. Her benefit from specialization and trade was 40 hours. Portugal exchanges 1 ton of wine for 3 tons of cheese from Sweden. It takes 25 hours to produce 1 ton of wine.
Therefore, to receive 3 tons of cheese from Sweden, she needs to spend 25 hours. But if she wanted to make the cheese herself, she would have to spend 3*40=120 hours.
/ typical tasks for met-11 with solutions
Solution: Total costs TC = fixed costs FC + variable costs VC = (average fixed costs AFC + average variable costs AVC) ∙ output Q. Given: AFC = 20 den. units / piece, AVC=100 den. units / piece, Q= 2000 pieces TS = (20 +100) ∙ 2000 = 240000 den. units Answer: b) 240 thousand den. units
- The company produced 100 units in the reporting period. products and sold it at a price of 22 thousand rubles. per piece
In this period wage employees amounted to 400 thousand rubles, the cost of raw materials and materials - 500 thousand rubles, the cost of used equipment - 300 thousand rubles. The salary of the owner of the company as an employee in a competitive enterprise would be 200 thousand rubles. Define: accounting costs; economic costs, accounting profit and economic profit of the enterprise.
How to Calculate Opportunity Costs
When the incremental cost of producing each additional unit of output is less than the average cost of the units already produced, the production of that next unit will lower the average total cost. If the cost of the next additional unit is higher than the average cost, its production will increase the average total cost. The above applies to short period. In the practice of Russian enterprises and in statistics, the concept of "cost" is used, which is understood as the monetary expression of the current costs of production and sales of products. The composition of the costs included in the cost price includes the cost of materials, overheads, wages, depreciation, etc.
How to Find Opportunity Costs
Typical examination (test) tasks for students of all specialties in the discipline "Economics ( Economic theory)» 2011-2012 academic year. year Below are typical tasks (total– 8) and examples of solving some of them. The correct formatting of the solution is in italics.
- Figure 1 gives a graphical model of the production possibilities of the economy. Determine the opportunity cost of producing an additional unit of good X at point A2.
Figure 1 Solution: In general terms, opportunity cost is the amount of one good (for example, good A) that must be sacrificed in order to obtain another good (for example, good B).
Accordingly, the calculation of the opportunity cost of producing one additional unit of good B is carried out according to the formula: Losses in the production of good A / gain in the production of good B.
Costs. production cost formulas
This means that instead of producing 1 ton of cheese, it can produce 0.2 tons of wine. At what proportion of the exchange of cheese for wine will Sweden enter into trade relations? The answer sounds like this: Sweden will change cheese for wine when for 1 ton of cheese it can get MORE than 0.2 tons of wine. If it receives exactly 0.2 tons of wine from trade, then Sweden does not care whether to produce wine on its own or to receive it from Portugal.
If Sweden receives less than 0.2 tons of wine from trade, then it will be profitable for Sweden to produce it on its own, and trade will not take place. Similarly, Portugal will change wine for cheese when for 1 ton of wine he gets MORE than 0.625 tons of cheese. This means that Portugal wants to get LESS for 1 ton of cheese than 1.6 tons of wine.
The intersection of the interests of Sweden and Portugal is in the range 1 CHEESE ∈ (0.2;1.6)WINE.
5.3 examples of solving some problems
In a narrower sense, sunk costs include the cost of resources that cannot be used in alternative ways, such as the purchase of specialized equipment. This category of expenses does not apply to economic costs and does not affect the current state of the company. Costs and price If the organization's average cost equals the market price, then the firm earns zero profit.
If favorable market conditions increase the price, then the organization makes a profit. If the price corresponds to the minimum average cost, then the question arises about the feasibility of production. If the price does not cover even the minimum of variable costs, then the losses from the liquidation of the firm will be less than from its operation.
International distribution of labor (MRI) At the heart of the world economy is MRI - countries specializing in the manufacture certain types goods.
Recall the definition of absolute advantage: the ability to produce more of a good with the same input of resources. Since we are not given the cost of resources in any form, the absolute advantage, that is, productivity, cannot be determined. Russia, although it produces more oil and steel, can spend many times more resources on their production than England. In order to calculate the comparative advantage, we calculate the opportunity cost of each product in each country. Russia: AI(oil) == 1.39 AI(steel) == 0.72 England: AI(oil) == 0.63 AI(steel) == 1.6 The results can be presented in the table: AI Russia England oil 1.39 0.63 steel 0.72 1.6 that the opportunity cost for oil is lower for England (0.63 less than 1.39) and for steel is lower for Russia (0.72 less than 1.6). It follows that England has a comparative advantage in oil and Russia in steel.
Problem number 142. opportunity cost calculation
This is the basis of any kind of cooperation between all states of the world. The essence of MRI is manifested in its division and unification. One production process cannot be divided into several separate ones.
At the same time, such a division will allow uniting separate industries and territorial complexes, establishing a relationship between countries. This is the essence of MRI. It is based on the economically advantageous specialization of individual countries in the manufacture of certain types of goods and their exchange in quantitative and qualitative proportions. Development factors The following factors encourage countries to participate in MRI:
- Volume of the domestic market.
Large countries have more opportunities to find the necessary factors of production and less need to engage in international specialization.
Educational materials
With the growth of output volumes, variable production costs, the calculation formulas of which are presented earlier:
- grow proportionally;
- slow down growth when the maximum profitable volume of production is reached;
- resume growth due to the violation of the optimal size of the enterprise.
Average costs Wanting to maximize profits, the organization seeks to reduce costs per unit of product. This ratio shows such a parameter as (ATS) average cost. Formula: ATC \u003d TC \ Q. ATC \u003d AFC + AVC. Marginal cost The change in the total cost as the volume of production increases or decreases per unit shows the marginal cost.
Formula: MC = TC \ Q. From an economic point of view, marginal cost is very important in determining the behavior of an organization in market conditions.
opportunity cost
If the demand function for a product is given by the equation QD=20-3Р, then the arc elasticity of demand for the price when it decreases from 5 rubles to 4 rubles is: a) -2.08; b) -1.63; c) -1.79; d) -1.79. Determine the nature of the price elasticity of demand. Solution: Let's use the formula for the price elasticity of demand: Ed =∆Q/∆P) ∙ (P1+P2/Q1+Q2) P1 = 5 rubles; P2 = 4 rubles; Q1 \u003d 20 - 3x5 \u003d 5 pcs.; Q2 \u003d 20 - 3x4 \u003d 8 pcs.
- ∆Q = Q2 - Q1 = 8 - 5 = 3.
- ∆P = P2 - P1 = 4 - 5 = - 1.
- P1 + P2 = 5 + 4 = 9.
- Q1 + Q2 = 5 + 8 = 13.
Ed = (3/ -1) ∙ (9/13) = (-3 ∙9) / 13 = - 27/13 = - 2.08. │Ed│ = │- 2.08│= 2.08 more than 1 → demand is elastic. 6. In the short run, the firm produces 2,000 units of a product at an average fixed cost of 20 den.
units, average variable costs - 100 den. units The value of the total costs is equal to: a) 80 thousand den. units; b) 240 thousand.
/ typical tasks for met-11 with solutions
Attention
In a narrower sense, sunk costs include the cost of resources that cannot be used in alternative ways, such as the purchase of specialized equipment. This category of expenses does not apply to economic costs and does not affect the current state of the company. Costs and price If the organization's average cost equals the market price, then the firm earns zero profit.
Important
If favorable market conditions increase the price, then the organization makes a profit. If the price corresponds to the minimum average cost, then the question arises about the feasibility of production. If the price does not cover even the minimum of variable costs, then the losses from the liquidation of the firm will be less than from its operation.
International distribution of labor (MRT) At the heart of the world economy is MRI - the specialization of countries in the manufacture of certain types of goods.
How to Calculate Opportunity Costs
Problem Let's assume that with full use of resources, 2 goods are produced: C and D. The options for the production combination are given in the table. Production options Good C Good D Opportunity cost of producing good D A 80 0 B 70 4 C 55 12 D 35 16 E 0 20 Draw a production possibilities curve.
Find opportunity costs. What shows their dynamics? Find on the graph points M (50 units of product C and 24 units of product D), N (20 units of product C and 8 units of product D). What do these dots indicate? Solution Transformation curve Production variants Commodity C Commodity D Opportunity costs of production of the commodity D A 80 0 – B 70 4 2.5 C 55 12 1.875 D 35 16 5 E 0 20 8.75 t. M – unattainable option; t. N - inefficient option; The dynamics of opportunity costs shows their increase as the production of good D increases.
How to Find Opportunity Costs
Info
Relationship Marginal cost should be less than the overall average (per unit). Failure to comply with this ratio indicates a violation of the optimal size of the enterprise. Average costs will change in the same way as marginal costs.
It is impossible to constantly increase the volume of production. This is the law of diminishing returns. At a certain level, variable costs, the formula for which was presented earlier, will reach their maximum. After this critical level, an increase in production even by one unit will lead to an increase in all types of costs.
Example Given the information on the volume of output and the level of fixed costs, it is possible to calculate all existing species costs. Issue, Q, pcs.
Costs. production cost formulas
The manual is presented on the website in an abbreviated version. In this version, tests are not given, only selected tasks and high-quality tasks are given, theoretical materials are cut by 30% -50%. I use the full version of the manual in the classroom with my students. The content contained in this manual is copyrighted.
Attempts to copy and use it without indicating links to the author will be prosecuted in accordance with the legislation of the Russian Federation and the policy of search engines (see the provisions on the copyright policy of Yandex and Google). Consider a simple task Given the production capabilities of two countries in two goods (in thousand tons per year): Russia England Oil 1680 320 Steel 2340 200 Based on these data, you need to calculate the absolute and comparative advantage. Solution: We note right away that the absolute advantage cannot be calculated from these data.
5.3 examples of solving some problems
A medieval blacksmith specializes in spears and plows. Can his alternative production possibilities be described by the following data? Spears, pcs 36 30 24 18 12 6 0 Plows, pcs 0 2 5 9 12 15 17 Solution: With an increase in the production of plows from 0 to 2, it is necessary to reduce the production of spears from 36 to 30. That is, an increase in the production of plows by 1 unit requires a reduction copies by 3 units: (36 - 30) / (2 - 0) = 3.
When increasing the production of plows from 2 to 5, it is necessary to reduce the production of spears from 30 to 24. That is, an increase in the production of plows by 1 unit requires a reduction in spears by 2 units. And according to the law of increasing opportunity costs: in order to get more of one kind of good in a given period of time, society must sacrifice an ever-increasing amount of another good.
opportunity cost of production
Each economy finds that it is more profitable for it to specialize in the product with the lowest opportunity cost and receive the second good from the other economy in the process of exchange, instead of producing the second good itself. Consider the problem of finding a benefit from trade Given the cost in hours per ton Cost in hours per ton Sweden Portugal Cheese 20 40 Wine 100 25 It is required to find the benefit for each country from exchanging 1 ton of wine for 3 tons of cheese. In order to find the benefit of the exchange, it is necessary to determine which product each economy will specialize in within the international division of labor. Here the already familiar rule will help us: a country specializes in the product, the opportunity cost of which is minimal, that is, in which it has a comparative advantage. We have already found comparative advantages for this task (cf.
Calculation of opportunity cost formula
At the same time, the opportunity cost of producing a good is measured not so much by the costs that an organization would incur if alternative development of events, how much profit that would have been received in this case. An example of the calculation of opportunity costs Let's define the opportunity costs of production using an example. In the reporting year, the organization sold its own products A for 200 million rubles.
The total cost of the organization amounted to 175 million rubles. Profit from activities - 25 million rubles. (200 million rubles - 175 million rubles). At the same time, in the reporting year, based on the forecast data, the organization could reorient itself to the production of product B. The annual sales volume for it was planned at the level of 220 million rubles, and the total amount of costs, taking into account the costs of reprofiling, was projected at 196 million rubles. rub. The profit of product manufacturer B would be 24 million rubles. In this case, 24 million rubles.
Opportunity cost is the term for lost profits when one of the existing alternatives is chosen over another. The amount of lost profits is measured by the utility of the most valuable alternative that was not chosen to replace the other. Thus, the law of opportunity cost occurs wherever acceptance is needed. rational decision and there is a need to choose between the available options.
The term was first introduced by the Austrian school economist Friedrich von Wieser in 1914 in his work The Theory of the Social Economy.
Determining Opportunity Costs
Thus, the opportunity cost is the cost of any, measured in terms of the value of the next best alternative, that is withheld. it key concept in the economy, providing the most rational and effective use limited resources. These costs do not always mean financial expenses. They also signify the real cost of abstained products, wasted time, pleasure, or any other benefit that provides utility.
Examples of Opportunity Costs
There are many examples of opportunity costs. Every person is faced daily with the need to make a choice between available options. For example, a person who wants to watch two interesting TV programs on TV at the same time on different channels, but does not have the opportunity to record one of them, will be forced to watch only one program.
Thus, his opportunity cost would be not being able to watch one of the programs. Even if he has the opportunity to record one of the programs while watching the other, even then there will be an opportunity cost equal to the time spent watching the program.
Another example is when a person comes to a restaurant and is forced to choose between a $10 steak and $20 salmon. By choosing the more expensive salmon, the opportunity cost is two steaks that could have been purchased with the money spent. And, on the contrary, choosing a steak, the cost will be 0.5 servings of salmon.
Opportunity costs can also be assessed in the decision-making process in economic activity. For example, if a farm can produce 100 tons of wheat or 200 tons of barley, then the opportunity cost of producing 100 tons of wheat is 200 tons of barley, which has to be discarded.
Under production costs it is customary to understand a group of expenses, cash expenditures necessary in order to create a product. That is, for enterprises (firms, companies), they act as payment for acquired production factors. Such expenses cover the payment of materials necessary to ensure the production process (raw materials, electricity, fuel), employees, depreciation, and expenses for ensuring production management. When goods are sold, entrepreneurs receive revenue. Some of the received financial resources goes to compensate for production costs (to produce the required amount of goods), the second part is to ensure profit, the main goal for which any production is started. This means the production will be less than the cost of the goods for the amount of profit.
What is opportunity cost?
Most of the costs of production - from the use of resources that ensure this very production. When resources are applied in one place, they cannot be applied elsewhere, because they are rare and limited. For example, the money that was spent to buy a blast furnace to produce pig iron cannot be used to make soda. Result: if any resource is decided to be used in some way, then it cannot be spent in another way.
Given this particular circumstance, with any decision to start production, it becomes necessary to refuse to use a certain amount of resources in order to use this very resource in the manufacture of other products. Thus, opportunity costs are formed.
- Suppose that the country produces 280 thousand pieces. calculators. Judging by the data in the table on the possibilities of issuing mobile phones and calculators, it can be assumed that an increase in demand for mobile phones can cause an increase in the supply of this product by a maximum of. Type of product Production alternatives A B C D E Mobile phones, thous. 0 100 180 240 280 Calculators, thous. 460 380 280 150 0 Solution: Each point on the production possibilities curve represents an option for the simultaneous production of two goods. At point A, all the country's resources are devoted to the production of calculators, in this situation the maximum number of them will be produced - 460 thousand pieces, while the production of mobile phones is 0.
opportunity cost
The concept of "opportunity costs" can be attributed to the planning and financial terminology. It is associated with the use of material resources, raw materials, technical, human and other resources that play important role in the production process. It is especially important to accurately account for such costs in enterprises that are not entirely profitable or are experiencing some other difficulties.
Rational use the entire material and technical base in this case can help the company stay afloat. The opportunity cost of production is the resources spent on the production of one type of product and evaluated in terms of lost opportunities to use them for other, alternative purposes. So, the company has a certain amount of money in the account.
And needs to be updated Technical equipment- purchase several machines. At the same time, additional raw materials are needed for production.
Solution: Accounting (explicit) costs = wages of employees + costs of raw materials and materials + cost of used equipment (depreciation). Economic Costs = Accounting Costs + Implicit Costs Implicit Costs (Internal Costs) = Opportunity Cost of Firm Owned Resources = Possible Wage of the Firm Owner as an Employee in a Competitive Enterprise Accounting Profit = Total Revenue - Explicit (External) Costs Economic Profit = Total income - (explicit costs + implicit costs). Total Revenue = Unit Price x Quantity of Goods Sold.
8. The highest degree of inequality in the distribution of income in society reflects the line. At the same time, the share of income of the richest 20% of the population is %.
An example is the conditions when organizations are limited in determining the alternative use of funds allocated to costs in the form of payments for the rental of real estate, the purchase of equipment and office equipment, current repair. Sources of Formation of Opportunity Costs Opportunity costs cannot be determined by assigning them to types of costs. The indicator is a design determined by calculation.
The company determines the value of lost opportunities based on its own understanding of the desired profitability of the business. From the point of view of economic theory, costs are subject to division into explicit and implicit types according to the source of formation. Explicit costs come from external sources, have clear documentary evidence and are recognized as accounting costs.
Solution: Total costs TC = fixed costs FC + variable costs VC = (average fixed costs AFC + average variable costs AVC) ∙ output Q. Given: AFC = 20 den. units / piece, AVC=100 den. units / piece, Q= 2000 pieces TS = (20 +100) ∙ 2000 = 240000 den. units Answer: b) 240 thousand.
The company produced 100 units in the reporting period. products and sold it at a price of 22 thousand rubles. per piece
In this period, the wages of employees amounted to 400 thousand rubles, the cost of raw materials and materials - 500 thousand rubles, the cost of used equipment - 300 thousand rubles. The salary of the owner of the company as an employee in a competitive enterprise would be 200 thousand rubles. Define: accounting costs; economic costs, accounting profit and economic profit of the enterprise.
Educational materials
Info
To calculate the opportunity cost of producing an additional unit of good X at point A2, it is necessary to determine which point on the production possibilities graph should be considered as the starting point. If we move to point A2 from point A3, then the volume of production of goods X will not increase, but will decrease from 2 pcs. item X up to 1 pc. of goods X. The production of goods X increases at point A2, if we move towards it from point A1.
At point A1, 0 pieces are produced. product X, and at point A2 - 1 pc. At the same time, the production of goods Y will be reduced from 10 pcs. at point A1, up to 9 pieces at point A2. Thus, the calculation formula will look like: The opportunity cost of producing an additional unit of product X at point A2 \u003d Loss in the production of product Y / gain in the production of product X = = (10 pcs.
comrade U - 9 pcs. comrade Y) / (1 pc of item X - 0 pc of item X) = = 1/1 = 1 pc. comrade U.
How to determine the opportunity cost of production
- opportunity cost
- Problem number 142. opportunity cost calculation
- / typical tasks for met-11 with solutions
- How to Find Opportunity Costs
- opportunity cost of production
Opportunity costs Typical examination (test) tasks for students of all specialties in the discipline "Economics (Economic theory)" 2011-2012 academic year Below are typical tasks (total number - 8) and examples of solving some of them.
How to calculate the opportunity cost of producing a good
- Cost accounting
The theory of comparative advantage was developed in the middle of the last century. In a simplified form, opportunity costs are characterized as lost opportunities. Opportunity costs are mainly considered in the framework of management accounting.
In the traditional sense accounting the concept of missed opportunities is absent due to the reflection of transactions at the time of their completion. In the article we will talk about the opportunity costs of production, give examples of the calculation. The emergence of opportunity costs In the process of management accounting in production, several types of costs are determined.
Attention
Opportunity costs are divided into 2 types: external and internal. External costs are associated with the acquisition of a resource and correspond to the benefit that can be obtained by using the same costs of another alternative resource. Internal costs are due to the use of not attracted, but own resources, which means that the time costs of the company's resources are equal to the benefit that can be obtained from the alternative use of its resources.
Related video Pay attention Fixed costs the company must bear in any case, to a certain extent they are practically independent of production volumes.How to Calculate Opportunity Costs
In the short run, a firm produces 2,000 units at an average fixed cost of $20. units, average variable costs - 100 den. units The value of the total costs is equal to: a) 80 thousand den. units; b) 240 thousand / typical tasks for met-11 with solutions At the same time, the opportunity costs of producing a good are measured not so much by the costs that the organization would incur in an alternative scenario of events, but by the profit that would be received in this case. An example of calculating opportunity costs Let's define opportunity cost of production by example. In the reporting year, the organization sold its own products A for 200 million rubles.
The total cost of the organization amounted to 175 million rubles. Profit from activities - 25 million rubles. (200 million rubles - 175 million rubles). At the same time, in the reporting year, based on forecast data, the organization could reorient itself to the production of products B.
What is the opportunity cost of production
However, in order to make decisions, all costs that are not directly recorded in the accounts should be taken into account. These costs are called opportunity costs or time. That is, these costs are costs that measure the profit that is sacrificed or lost as a result of choosing an option, and when the remaining options have to be abandoned.
4 Non-capital opportunity costs can only be considered when scarce resources are involved, such as limitations in materials, equipment or labor. When resources are not scarce, they cannot be allocated in favor of any other option. 5 In order to calculate the time costs of the company, it is necessary for each factor introduced in the production to evaluate the profit lost by the enterprise when using the resource not in the best way, but in the nearest, in monetary form.
How to determine the opportunity cost of production
Calculate the volume of deficit (overproduction) of goods; 3) if the number of consumers of the goods increases, then how the schedules of supply and demand will change, determine the parameters of the new market equilibrium. Solution:
- D2 and S2, Pe = 24 (den. units) and Qe = 29 (pcs.).
- Setting the price at a level above the equilibrium level (33 more than 24) leads to the emergence at this price of an excess supply or overproduction of goods. ∆ Q \u003d Qs - Qd \u003d 31 - 24 \u003d 7 (pcs.).
- An increase in the number of consumers is a non-price factor in demand, demand increases and the demand curve shifts to the right. The offer remains unchanged: D3 and S2, Pe = 33 (den.
units) and Qe = 31 (pcs.).
- The product demand function is given by the equation QD=20-3P, and the supply QS=2P-10. What is the equilibrium price and the equilibrium quantity sold.