Choosing the Location for a New Law School Building a Northwestern University Law School 1)Current location in downtown Chicago 2)Alternative location in Evanston with the main campus Chapter 7 Slide 11
Chapter 7 Slide 11 Choosing the Location for a New Law School Building ◼ Northwestern University Law School 1) Current location in downtown Chicago 2) Alternative location in Evanston with the main campus
Choosing the Location for a New Law School Building a Northwestern University Law School 3)Choosing a Site ◆ Land owned in Chicago Must purchase land in Evanston Chicago location might appear cheaper without considering the opportunity cost of the downtown land (i.e. what it could be sold for Chapter 7 Slide 12
Chapter 7 Slide 12 ◼ Northwestern University Law School 3) Choosing a Site ◆Land owned in Chicago ◆Must purchase land in Evanston ◆Chicago location might appear cheaper without considering the opportunity cost of the downtown land (i.e. what it could be sold for) Choosing the Location for a New Law School Building
Choosing the Location for a New Law School Building a Northwestern University Law School 3)Choosing a Site Chicago location chosen--very costly o Justified only if there is some intrinsic values associated with being in Chicago .If not. it was an inefficient decision if it was based on the assumption that the downtown land was "free Chapter 7 Slide 13
Chapter 7 Slide 13 ◼ Northwestern University Law School 3) Choosing a Site ◆Chicago location chosen--very costly ◆Justified only if there is some intrinsic values associated with being in Chicago ◆If not, it was an inefficient decision if it was based on the assumption that the downtown land was “free” Choosing the Location for a New Law School Building
Measuring Cost Which Costs Matter? Fixed and variable Costs a Total output is a function of variable inputs and fixed inputs a Therefore, the total cost of production equals the fixed cost (the cost of the fixed inputs) plus the variable cost (the cost of the variable inputs), or TC=FC+Vc Chapter 7 Slide 14
Chapter 7 Slide 14 ◼ Total output is a function of variable inputs and fixed inputs. ◼ Therefore, the total cost of production equals the fixed cost (the cost of the fixed inputs) plus the variable cost (the cost of the variable inputs), or… TC =FC+ VC Measuring Cost: Which Costs Matter? Fixed and Variable Costs
Measuring Cost Which Costs Matter? Fixed and variable Costs ■ Fixed cost o Does not vary with the level of output ■∨ ariab| e cost o Cost that varies as output varies Chapter 7 Slide 15
Chapter 7 Slide 15 ◼ Fixed Cost ⚫ Does not vary with the level of output ◼ Variable Cost ⚫ Cost that varies as output varies Measuring Cost: Which Costs Matter? Fixed and Variable Costs