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