Bain's Limit Pricing Model

The Costs of Production'

There are many different types of costs. Invariably, firms believe costs are too high and try to lower them

Opportunity costs The value of the other products that the resources used in production could have produced at their next best alternative

Historical costs The amount the firm actually paid for a particular input

Explicit costs include the ordinary items that an accountant would include as the firms expenses Implicit costs include opportunity costs of resources owned and used by the firm’s ow

Fixed costs are those that are spent and cannot be changed in the period of time under consideration. In the long run there are no fixed costs since all costs are variable. In the short run, a number of costs will be fixed

Cost Analysis