Cost Curves
besa44438_ch08.qxd 10/12/04 4:49 PM Page 259
8
C H A P T E R
COST
CURVES
8.1
LONG-RUN COST CURVES
APPLICATION 8.1
The Long Run Cost of Trucking
APPLICATION 8.2
The Costs of Higher Education
APPLICATION 8.3
Economies of Scale in Refining
Alumina?
APPLICATION 8.4
Hospitals Are Businesses Too
APPLICATION 8.5
Tracking Railroad Costs
APPLICATION 8.6
Economies of Scope for the
8.2
S H O RT- R U N C O ST C U RV E S
8.3
SPECIAL TOPICS IN COST
Swoosh
Experience Reduces Costs of
Computer Chips
APPLICATION 8.7
8.4
E S T I M AT I N G C O S T F U N C T I O N S
Appendix
SHEPHARD’S LEMMA AND DUALITY
How Can HiSense Get a Handle on Costs?
The Chinese economy in the 1990s underwent an unprecedented boom. As part of that boom, enterprises such as HiSense Group grew rapidly.1 HiSense, one of China’s largest television producers, increased its rate of production by 50 percent per year during the mid-1990s. Its goal was to transform itself from a sleepy domestic producer of television sets into a consumer electronics giant whose brand name was recognized throughout Asia. By 2004 HiSense was not only one of China’s major producers of color TVs, but also one of its leading producers of personal computers.
1
This example is based on “Latest Merger Boom Is Happening in China and Bears Watching,” The Wall
Street Journal ( July 30, 1997), pp. A1 and A9.
besa44438_ch08.qxd 10/12/04 4:49 PM Page 260
Of vital concern to HiSense and the thousands of other Chinese enterprises that were plotting similar growth strategies in the late 1990s and early 2000s was how production costs would change as volume of output increased. There is little doubt that HiSense’s total production costs would go up as it produced more television sets. But how fast would they go up? HiSense’s executives hoped that as it produced more television sets, the cost of each television set would go down, that is, its unit costs would fall as its annual rate of output went up.
HiSense’s executives also
8
C H A P T E R
COST
CURVES
8.1
LONG-RUN COST CURVES
APPLICATION 8.1
The Long Run Cost of Trucking
APPLICATION 8.2
The Costs of Higher Education
APPLICATION 8.3
Economies of Scale in Refining
Alumina?
APPLICATION 8.4
Hospitals Are Businesses Too
APPLICATION 8.5
Tracking Railroad Costs
APPLICATION 8.6
Economies of Scope for the
8.2
S H O RT- R U N C O ST C U RV E S
8.3
SPECIAL TOPICS IN COST
Swoosh
Experience Reduces Costs of
Computer Chips
APPLICATION 8.7
8.4
E S T I M AT I N G C O S T F U N C T I O N S
Appendix
SHEPHARD’S LEMMA AND DUALITY
How Can HiSense Get a Handle on Costs?
The Chinese economy in the 1990s underwent an unprecedented boom. As part of that boom, enterprises such as HiSense Group grew rapidly.1 HiSense, one of China’s largest television producers, increased its rate of production by 50 percent per year during the mid-1990s. Its goal was to transform itself from a sleepy domestic producer of television sets into a consumer electronics giant whose brand name was recognized throughout Asia. By 2004 HiSense was not only one of China’s major producers of color TVs, but also one of its leading producers of personal computers.
1
This example is based on “Latest Merger Boom Is Happening in China and Bears Watching,” The Wall
Street Journal ( July 30, 1997), pp. A1 and A9.
besa44438_ch08.qxd 10/12/04 4:49 PM Page 260
Of vital concern to HiSense and the thousands of other Chinese enterprises that were plotting similar growth strategies in the late 1990s and early 2000s was how production costs would change as volume of output increased. There is little doubt that HiSense’s total production costs would go up as it produced more television sets. But how fast would they go up? HiSense’s executives hoped that as it produced more television sets, the cost of each television set would go down, that is, its unit costs would fall as its annual rate of output went up.
HiSense’s executives also