HCA530 Supply Production Cost
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Write an answer of no less than one-half page in length for
each of the first four questions below about economic concepts described in
chapters 6 and 7 of the text, Economics
of Health and Medical Care. Calculate and fill in the blanks for the table
in question 5.
1.
Explain the difference between explicit and implicit
costs of production.
Both explicit and implicit costs are part of the total
opportunity costs. Opportunity costs are costs incurred when producing a good;
or in the case of health care, providing services for patients, such as
doctor’s office or laboratory.
Explicit costs it’s the actual monetary payments that are
recorded, or input costs that require and outlay of money by the company. For
example the wages paid for labor or the rent paid. Explicit costs are the sum
of all the monetary payments made for resources used to produce a good. For
example in a doctor’s office an explicit cost would be the salary of the person
that does the billing, or the salary of the doctor himself.
Implicit costs are costs that
require no actual monetary payments, they do not require an outlay of money by
the firm, and they include the total value of resources used to produce a good,
which no direct payment is made. All non-monetary outlay of the production
costs associated with all the inputs used in production must be included into
these costs. An example of an implicit costs for health care organization would
be when purchasing equipment and requiring to make payment sin this capital
equipment, the $50 per patient that need to be used for the re-payment, it’s
money that cannot be counted for profit purposes, in other words, we are
missing on $50 per patient of profit.
2.
Explain the reasoning behind the U-shaped, long-run,
average cost curve.
The reason why the long run average curve is u shaped is
because
3.
Explain the law of diminishing marginal returns.
4.
Describe economies and diseconomies of scale.
Economies of scale describe where the long-run average total
costs falls as the quantity of output increases
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