Microeconomices Term Paper Example | Topics and Well Written Essays - 1500 words - 1

Microeconomices - Term Paper Example f individuals, firms, and industries in terms of producing and consuming of economic goods and services, the concept of cost is relevant as it affects microeconomic activities of the units concerned. For consumers and individuals who are not familiar with the concepts of costs, one might have the tendency to discard this as irrelevant and immaterial. However, close examination of these underlying theories would enlighten consumers on their effects on prices and quantities of goods which are normally offered to the public. It is therefore the objective of this essay to present relevant concepts, theories and applications concerning costs in microeconomics. The costs to be discussed range from opportunity cost, production costs, marginal cost, cost of externalities, the law of diminishing returns and economies of scale. It is interesting to note that in economics, all costs are considered opportunity costs. As rationalized by Petroff (par. 2), â€Å"anytime a resource is used for any purpose, it implies that some other good cannot be produced with that quantity of the resource, that some other resource is not used for the given production instead, and that revenues from other production are foregone. Thus, costs are either explicit cost for the resource used or implicit costs from alternative use of the resource.† To use a practical application, for a consumer who decided to buy a television set, the opportunity cost could be the value of a trip to a nearby beach resort which was not taken due to the purchase. Productions costs are normally related to firms or business enterprises engaged in manufacturing or producing goods for sale to the public. The concept of productions costs are not only discussed in microeconomics but more so in accounting or finance. Production managers are tasked with monitoring the costs of raw materials as well as labor and overhead costs to maximize profits. These costs could be classified as fixed, variable and total costs. Petroff