Production and Cost Minimizing Output

Running head: PRODUCTION AND COST MINIMIZING OUTPUT
PRODUCTION AND COST MINIMIZING OUTPUT
Name of the Student
Name of the University
Author Note:

PRODUCTION AND COST MINIMIZING OUTPUT1
Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
Answer to Question 1..................................................................................................................2
Answer to Question 2..................................................................................................................2
Answer to Question 3..................................................................................................................3
Conclusion.......................................................................................................................................4
Reference.........................................................................................................................................5

PRODUCTION AND COST MINIMIZING OUTPUT2
Introduction
In economics, the total cost (TC) incurred in the production is the total economic cost of
production. It includes variable cost as well as fixed cost plus the opportunity cost, i.e. the
benefit or value of something that must be given up to acquire something else. Explicit cost are
the cost incurred out of the pocket by the firm such as salaries, rent, wages or material. Implicit
cost are the imputed value of the entrepreneur’s own resources and services. These are the cost
of the factors owned by the entrepreneur himself like capital, inventories and salary of the
entrepreneur (Goerg, Kube & Radbruch, 2019).
Discussion
Answer to Question 1.
In the case of pat’s pizza restaurant following items are categorized as:
1) Explicit Cost
2) Implicit Cost
3) Explicit cost
4) Implicit Cost.
Answer to Question 2.
The problem regarding the cost minimization for Pat’s pizza restaurant is shown below:
a) The above equation is unequal as MPL/W is more than the MPK/R, therefore, the
company is not minimizing cost. To reduce the cost, MPL/W should be equal to MPK/R.