The Four Major Emphasis Strategies That Are Used to Enhance Verbal Communication

The Four Major Emphasis Strategies That Are Used to Enhance Verbal Communication

Visual Communication

Visual communication is the conveyance of ideas and information in forms that can be seen. Visual communication in part or whole relies on eyesight, it an important of our feelings, and even how we know this world in the beginning. We saw what is happening and think about how it happened.

Visual communication often used to help audiences to better understand the topic being presented. And depends on their preference and the information they are trying to present, there are many different types of visual aid. Presentations or information such as advertisements, teaching and learning, speeches, and presentations all involve some kind of visual communications. 

Although visual aids can be a very powerful tool to enhance the impact of presentations, you still must be very careful before you consider using it and ensure it will be used correctly, and beneficial to the overall presentation. Therefore, you must plan ahead and choose an appropriate visual aid.

Moreover, when driving on the road, we also communicate with other drivers. What happens if we give the wrong signal to others? 

Signposts

The signpost is one of the ways you can help your audience avoid this by signaling to them when a change is coming, the keywords that alert the audience to a change in topic.

The prefrontal cortex in our brain is like a limited temporary memory widget which implicated in planning complex cognitive behavior, personality expression, decision making, and moderating social behavior(SoP et al., Prefrontal Cortex 2020). 

Readers or listeners may lose their directions sometimes, forget what point is being made or variables progressively across time. However, you can help your audience avoid this by signaling to them when a change is coming. Helping them to catch the points, and follow up.

Repetition

Repetition can be an effective way to help your audience retain it in their memory, if you use it appropriately. In an analysis of nearly a million job listings, Monster.com found that the ability to communicate effectively was one of the top skills sought by employers. However, despite this reality, LinkedIn research has found that the number one skills gap across 100 major U.S. cities is communication(Cornett, Why Effective Communication Requires Repetition).

However, repetition not just boringly say the same word over and over again. You must have an alternative way to share your idea. The tile, “Global warming is raising ocean levels.” maybe not so understandable to people. But if you can prove that their house will be flooded over, or show them those scary videos, such as entire islands are going underwater. People always remember bad things longer than good things. 

Internal Summaries and Foreshadowing

Similar to signposts, internal summaries and foreshadowing also help audiences to keep on track by reviewing what has been covered, and by highlighting what is coming next.

For instance, If you’re unable to work one of your shifts, and you have to give it to one of your coworkers (drop the shift) or trade shifts with one of your coworkers (swap shifts), you must communicate with them for where or how much the works have been done. 

Is there one in particular that you believe is most effective? 

According to my personal experience, all of the four major emphasis strategies are very helpful. They are all part of how our brain works, and we all have to consider all the factors before we choose one or all from them, since the variety of personalities.

Is there one in particular that you have used in the past that successfully enhanced the message you were trying to deliver verbally and in a business setting?

Recently, one of my friends started to host his apartment on Agoda. In the beginning, he found that his customers cannot easily understand his apartment is in a great place and near a train station which is pretty convenient. Then, I started to think about the solutions. And I found that I can introduce the apartment with a map. On the map, I can show it to the customers with far more details, and the great restaurants nearby. After putting my idea on, his apartment for accommodation is increasing much more reservation rate.

Reference

Saylor URL: http://www.saylor.org/books

Visual communication. (2020, April 23). Retrieved June 25, 2020, from https://en.wikipedia.org/wiki/Visual_communication

SoP, Prefrontal cortex of left cerebral hemisphere. Shown in red. Polygon data were generated by Database Center for Life Science(DBCLS)[2]. – Polygon data are from BodyParts3D[1], Prefrontal cortex of left cerebral hemisphere. Shown in red. Polygon data were generated by Database Center for Life Science(DBCLS)[2]., 6, N., 3, R., 6, N., . . . *, N. (2020, April 12). Prefrontal Cortex. Retrieved June 26, 2020, from https://www.thescienceofpsychotherapy.com/prefrontal-cortex/

Cornett, I. (n.d.). Why Effective Communication Requires Repetition. Retrieved June 26, 2020, from https://www.eaglesflight.com/blog/why-effective-communication-requires-repetition

"Tactics for Effective Communication," in The Business Professor, updated October 9, 2019, last accessed June 26, 2020, https://thebusinessprofessor.com/lesson/tactics-for-effective-communication/.

What is your strongest skill?

What is your strongest skill? 

After I read the top five personal qualities or skills potential employers seek, I don't think I have one of those strong skills. Even I did have one, I still think it is not strong enough. But I would say, I really want to improve all these skills to a higher level. If I really need to pick one, in particular, I would say that I am good at breaking things down to pieces and achieve them piece by piece, just like the principle of management. Make a plan, set goals and objectives, and finish them by a logical process. I considered it is an analytical skill maybe, but I am not so sure it is good enough. So, I came here to learn more.

What skill needs improvement?

Well, clearly all of them need to improve. I like to learn things that I love, and look back to what I have improved. So, I would learn all of the top five personal qualities or skills potential employers seek as good as I can. 

What skill do you think you will need the most in your future/current profession?

I think I will need all of the five skills in the future. Communication skill is one of the power to build strong connections between people. The same ideas can end up with different results if you switch it to different terms and words. A strong work ethic is what I need my future employees to have, so I have to know and learn it first, in order to create a better culture for my company. We all need to work with other people unavoidably, so teamwork skills are the way we can put our effort into the place where we do best.

A vocabulary list of unfamiliar words from the required readings and provide definitions. 

Inherent

From the textbook, page 28, "Your audience comes to you with an inherent set of expectations that you will fulfill these responsibilities."

Definition: Adjective

Existing in someone or something as a permanent and inseparable element, quality, or attribute; inhering: an inherent distrust of strangers.

Facets

From the textbook, page 28, "As the business communicator’s first responsibility, preparation includes several facets which we will examine: organization, clarity, and being concise and punctual."

Definition: noun

1.one of the small, polished plane surfaces of a cut gem.

a similar surface cut on a fragment of rock by the action of water, windblown sand, etc.

2.aspect; phase: They carefully examined every facet of the argument.

3.Architecture. any of the faces of a column cut in a polygonal form.

5.Zoology. one of the corneal lenses of a compound arthropod eye.

Concise

From the textbook, page 28, "As the business communicator’s first responsibility, preparation includes several facets which we will examine: organization, clarity, and being concise and punctual."

Definition: adjective

Expressing or covering much in few words; brief in form but comprehensive in scope; succinct; terse.

Punctual

From the textbook, page 28, "As the business communicator’s first responsibility, preparation includes several facets which we will examine: organization, clarity, and being concise and punctual."

Definition: adjective

1.Strictly observant of an appointed or regular time; not late; prompt.

2.Made, occurring, etc., at the scheduled or proper time.

3.Pertaining to or of the nature of a point.

References

https://my.uopeople.edu/mod/resource/view.php?id=210074

Inherent. (n.d.). Retrieved June 21, 2020, from https://www.dictionary.com/browse/inherent?s=t

Facets. (n.d.). Retrieved June 21, 2020, from https://www.dictionary.com/browse/facets?s=ts

Concise. (n.d.). Retrieved June 21, 2020, from https://www.dictionary.com/browse/concise?s=t

Punctual. (n.d.). Retrieved June 21, 2020, from https://www.dictionary.com/browse/punctual?s=t

The 8 Essential Components of Communication

The 8 Essential Components of Communication

Source

Where did you get the information about the advertisement for the new product of your favorite brand? In an advertisement case, the source is the marketing media who give the information. The source is about where does the information or messages come from and where do they go to while receivers give feedbacks and replies. By analyzing for the receiver’s reaction, the advertiser (the source) perceives how well they received the message and responds with clarification or supporting that information.

Message

The stimulus, the definition, the information produced by the source for the receiver is the message. For instance, when you plan to post an advertisement on your firms' Instagram, your message including the words you choose, and the pictures you choose that will convey what you want to achieve. In the advertisement, the message consists of the way you sent it—through a post, with the pictures, the famous stars or actors in the pictures, and the formatting you choose. Also, this kind of message may only be received by those who already on Instagram.

Channel

If your message is a boat, then you need the water to help them travel. As I mentioned in the post of an advertisement on your firms' Instagram, your post needs to be sent on Instagram. 

Receiver

The receiver receives the message from the source. They analyze, unlock, memories, and understanding the message in ways both intended and unintended by the source. Recall the advertisement case, think of the receivers on Instagram. 

You sent a post (message) to the followers (receivers), who may see and interpret what you are trying to deliver. You may intend for the followers (receivers) to get your idea (message) in your way, but the receivers may see things differently and reducing the effectiveness of your advertisement (the intended meaning). Therefore, you must imagine yourself in their place, you anticipate what you would look for if you were them. 

Feedback

When the followers of your firm respond to the source, intentionally or unintentionally, your followers are giving feedbacks. In this case, the feedback is composed of the comments (messages) the followers (receivers) send back to the source. Those feedbacks allow the producer of the advertisement to analyze how well, how accurately (or how poorly and inaccurately) the message was received. And finally, as the amount of feedback increases, the accuracy of communication also increases.

Environment

When we mention the environment, we are likely to think about the earth we lived on, the atmosphere, other animals we are living with, and the physical existence which are those objects. To be more clear, the environment can include the tables, those comfortable chairs, warm lighting, and 8D sound around the room, just like you are in a nightclub or a coffee shop. In a coffee, they may text each other, or talk to each other softly compare to their laugh out loud in a nightclub.

Context

What is the context of communication? It involves the setting, scene, and expectations. For instance, an advertising producer set a scenario and made a story to induce their customers to increase their sales. In this case, the sale is the expectation, and also the customers get their desires.

The degree to which the environment is formal or informal depends on the contextual expectations for communication held by the participants. On your personal Instagram, you post a lot of your own story and present it in your own way. But on your business account, you may post it differently and considering it with different logic. As we can understand, the context is about what people expect from each other. Context plays a very important role in communication, particularly across cultures.

Interference

We mostly called it noises, and it can come from any source. To be more specific, interference means anything that blocks or changes the source’s intended meaning of the message. For instance, when you sleeping at night, a mosquito flying around your head and give you a bite without your permission, it is truly an interference.

It is also can be psychological. Recall the unhappy night you had, you feel tired and hangover. When your boss assigns you a task, you do not work out any solution to achieve it. Then, you become inconvenienced in your job. What was the problem? Can we fix the issue?

However, not all noise is bad, but noise interferes with the communication process. We do need to consider them carefully. 

What Would Occur If One of These Elements Was Taken Out of The Process of Communication? 

Let begin with the one we are most likely want to remove, the interference. We often feel great when we have removed interference. But the truth is, it is not always as bad as we think it is, particularly not for everyone. For instance, your favorite hit hop music may be a relaxing noise to you, but it may interrupt the communication process in a meeting.

How About No Feedbacks?

Imagine that you post your advertisement on Instagram, and there are no comments, likes, or shares. How do you know that your advertisement actually works as well as you think? More than that, the communication will be just a one-way path, no interactions, or information exchanges.

The word count: 885 words without the references.

References

Saylor URL: http://www.saylor.org/books

File for Bankruptcy Instead of Completely Shutting Down

Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?

In the United States, bankruptcy is governed by federal law. The state laws are often applied to determine how bankruptcy affects the property rights of debtors. However, there's a threshold. Bankruptcy cases are usually either voluntary or involuntary. Involuntary bankruptcy, which is the majority of cases, debtors petition the bankruptcy court. With involuntary bankruptcy, creditors file the petition in bankruptcy. The bankruptcy system generally tries to reward creditors who continue to extend financing to debtors and discourage creditors from accelerating their debt collection efforts. Avoidance actions are some of the most obvious of the mechanisms to encourage this goal.

Although they file for bankruptcy, and they possibly have to shut down in the end, they still continue operating. Why? Recall the profit-maximize firms are increasing their production until their marginal cost equals the marginal revenue, which doesn't make sense to produce one more to lose more money, and we can split the average total cost into two parts, the fixed cost, and the variable cost. The reason why they still stay in the market and continue operating is their operations can cover some fixed costs since the revenues are higher than the variable cost. If the price, the marginal revenue is higher than the variable cost, it means their operations actually help them to pay for some of their fixed cost. 

Suppose the Starbruce Bank is operating in the negotiation of bankruptcy. It earns $1,000,000 in revenue but has to pay $5,000,000 for fixed cost, and $200,000 for variable cost. So, the profit is $-4,200,000. If the Starbruce chooses to shut down, their revenue is zero, but still has to pay the $5,000,000 for the fixed cost. Compare those two options, you may find that continue operating is a relatively better choice.

Now we know the reason. Firms in the United States continue operating after filing for bankruptcy become it's less costly to file for bankruptcy and continue operating than to shut down because there are costs to shutting down and to resume business operations.

Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?

While the oil price rises in earlier years, America’s shale oil industry entering the market of a near-monopoly market which almost being controlled by the OPEC. They clearly need to consider how the monopolist might react. The OPEC reacted with predatory pricing, which uses the threat of sharp price cuts to discourage competition. In the beginning, the OPEC wants to reduce the marginal revenue generated by America’s shale oil industry to make them unprofitable, since they can produce at a very low price. 

Similarly, if I managing a small firm and thinking about entering the market of a monopolist, I would have to consider the predatory pricing the monopolist might react. And I also need to consider the roots of the monopoly, was it natural, control of a physical resource, legal monopoly, patent, or just intimidating potential competitors like the OPEC. Before setting the strategies to entry, I better know how it monopoly or what is the monopolist. 

Reference

https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Putin dumps OPEC to start a war with America's shale oil industry. (n.d.). Retrieved from https://www.worldoil.com/news/2020/3/6/putin-dumps-opec-to-start-a-war-with-america-s-shale-oil-industry

McFarlane, S., & Minczeski, P. (2019, April 18). OPEC vs. Shale: the Battle for Oil Price Supremacy. Retrieved from https://www.wsj.com/articles/opec-vs-shale-the-battle-for-oil-price-supremacy-11555588826

The Kinked Demand Curve and The OPEC

Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product? 

If the kinked demand curve to be a right angle, it more like a price ceiling set by the government or OPEC, which doesn't make sense since they all want to gain more profits. In an oligopolistic market, a firms' perceived demand curve is not fixed, since it keeps changing as competitors change the prices and the quantity of output. Moreover, in many oligopolist markets, it has been observed that prices tend to remain inflexible for a very long time. Even in the face of declining costs, they tend to change infrequently. In cartels like OPEC, their producers cooperating and controlling the output and price in the market to increase gains that behave like a monopoly. In this case, the demand curve becomes less extreme, which more like a normal market demand curve. 

The kinked demand curve of oligopoly assumes that response to a price increase is less than the response to a price decrease, and the elasticity of demand is perfectly elastic if price increases and perfectly inelastic if the price decreases. Although OPEC obviously knows that Oil has an inelastic demand curve, they mostly control and cooperating with reducing or increasing the output. They do not want to offer the market shares to the shale oil producers. 

Suppose each firm produces a somewhat different product, it may depend on either they are substitutes or not. If they are perfect substitutes, the price change will not seriously affect each other like they are producing identical products. Ultimately, they still have to consider the normal demand curve, since they cannot perfectly or totally control this market. 

When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term—that the incentives for individual members to cheat would become too strong. More than forty years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? 

OPEC has acted as a monopoly for decades. They keep the price high to make higher profits. Oil has an inelastic demand curve, and this natural resource is luckily gifted to these countries. From the organization is started, they enforced cooperation through policy such as group production ceiling divided among members. Amazingly, OPEC has been successfully operating for decades, and its members are mostly oil-producing countries. 

Although OPEC has strong market power, each oil-producing country still needs that the world should have a high demand for its petroleum, and the alternative power resources are big threats. By cooperating, they may slow down the development of the substitutes. Furthermore, OPEC operates as a formal structure instead of an informal cartel who has to work behind the curtains. The structure of this organization helps the members implement more strict rules, ensuring they can trust each other, and able to supervise the overall supply. 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Stevens, P. (2020, April 10). OPEC and allies agree to historic 10 million barrel per day production cut. Retrieved from https://www.cnbc.com/2020/04/09/oil-jumps-ahead-of-make-or-break-opec-meeting.html

Kinked Demand Curve: Concept, Graphical Representation, Examples, etc. (2019, December 3). Retrieved from https://www.toppr.com/guides/business-economics/determination-of-prices/kinked-demand-curve/

Perfect Competition Market

Perfect Competition Market

1. Perfect competition is a theoretical market structure.
2. All firms are selling identical products.
3. All firms are price takers which means they cannot influence the market price of their product.
4. Market share has no influence on prices since the price is determined by supply and demand.
5. Buyers have complete information about the product being sold and the prices charged by each firm.
6. Resources (such as labors) are perfectly mobile.
7. Firms can enter or exit the market without any restrictions.

The Government Should Intervene in The Perfect Competition Market?

As a free country like Taiwan, the government is trying to do as few regulations or interruptions as they can. But sometimes, there are always some reasons the government should intervene or not. Most countries intervene in some specific market for multiple reasons such as national security, public health, avoid crime or fraud. However, even these restrictions seem to be positive, there are always some side effects that occur. The intervention is sometimes necessary and assists the market to increase the quality of the products or services. 

Reasons to Intervene

Most governments have a combination of many different objectives when they intervene in the market. 

Social Welfare

Without regulation, businesses can produce negative externalities without consequence. This all leads to diminished resources, stifled innovation, and minimized trade and its corresponding benefits. 

To Improve Variety and Quality

Choices are the basic power to move the economics forward. For instance, many Japanese railway companies are owned by private. If they are operating exactly the same lines and services, they don't have to compete with each other, they just have to operate like zombies. But if the government intervene in the market and regulate with the basic rules, the railway companies will follow up the steps to improve their services. Suppose the government regulates that all railways have to purchase insurance for their customers, those companies will now have to upgrade in order to stay in the market.

National Security

This is one of the most common reasons for governments to intervene in a perfect market since it is reasonable for a government to do it. For political reasons, it is also understandable. For instance, in the national defense industry, if firms can enter or exit the market without any restrictions, those secret data will be easy to out exposed.

For Macroeconomic

Governments are supposed to intervention to overcome prolonged recessions and reduce unemployment. Firms can enter or exit the market without any restrictions mean that the workers are at high risk. 

Public Goods

In a free market, public goods such as law and order and national defense would not be provided because there is no financial incentive to provide goods with a free-rider problem (you can enjoy without paying them). Therefore, to provide public goods like lighthouses, police, roads, it is necessary for a government to pay for them and out of general taxation.

Reasons for Do Not Intervene

Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources.

Wrong Decisions

Governments are possible to make the wrong decisions and influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome.

Personal Freedom

Government intervention is taking away individuals' decisions on how to spend and act. The economic intervention takes some personal freedom away.

Reference

Hayes, A. (2020, February 5). Understanding Perfect Competition. Retrieved from https://www.investopedia.com/terms/p/perfectcompetition.asp

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Boundless. (n.d.). Boundless Economics. Retrieved from https://courses.lumenlearning.com/boundless-economics/chapter/government-intervention-and-disequilibrium/

Pettinger, T., & Wes. (2020, April 30). Should the government intervene in the economy? Retrieved from https://www.economicshelp.org/blog/5735/economics/should-the-government-intervene-in-the-economy/

File for bankruptcyinstead of completely shutting down?

Critical Thinking Question 1

Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?

The Answer

In the United States, bankruptcy is governed by federal law. The state laws are often applied to determine how bankruptcy affects the property rights of debtors. However, there's a threshold. Bankruptcy cases are usually either voluntary or involuntary. Involuntary bankruptcy, which is the majority of cases, debtors petition the bankruptcy court. With involuntary bankruptcy, creditors file the petition in bankruptcy. The bankruptcy system generally tries to reward creditors who continue to extend financing to debtors and discourage creditors from accelerating their debt collection efforts. Avoidance actions are some of the most obvious of the mechanisms to encourage this goal.

Although they file for bankruptcy, and they possibly have to shut down in the end, they still continue operating. Why? Recall the profit-maximize firms are increasing their production until their marginal cost equals the marginal revenue, which doesn't make sense to produce one more to lose more money, and we can split the average total cost into two parts, the fixed cost, and the variable cost. The reason why they still stay in the market and continue operating is their operations can cover some fixed costs since the revenues are higher than the variable cost. If the price, the marginal revenue is higher than the variable cost, it means their operations actually help them to pay for some of their fixed cost. 

Suppose the Starbruce Bank is operating in the negotiation of bankruptcy. It earns $1,000,000 in revenue but has to pay $5,000,000 for fixed cost, and $200,000 for variable cost. So, the profit is $-4,200,000. If the Starbruce chooses to shut down, their revenue is zero, but still has to pay the $5,000,000 for the fixed cost. Compare those two options, you may find that continue operating is a relatively better choice.

Now we know the reason. Firms in the United States continue operating after filing for bankruptcy become it's less costly to file for bankruptcy and continue operating than to shut down because there are costs to shutting down and to resume business operations.

Critical Thinking Question 2

Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?

The Answer

While the oil price rises in earlier years, America’s shale oil industry entering the market of a near-monopoly market which almost being controlled by the OPEC. They clearly need to consider how the monopolist might react. The OPEC reacted with predatory pricing, which uses the threat of sharp price cuts to discourage competition. In the beginning, the OPEC wants to reduce the marginal revenue generated by America’s shale oil industry to make them unprofitable, since they can produce at a very low price. 

Similarly, if I managing a small firm and thinking about entering the market of a monopolist, I would have to consider the predatory pricing the monopolist might react. And I also need to consider the roots of the monopoly, was it natural, control of a physical resource, legal monopoly, patent, or just intimidating potential competitors like the OPEC. Before setting the strategies to entry, I better know how it monopoly or what is the monopolist. 

Reference

https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Putin dumps OPEC to start a war with America's shale oil industry. (n.d.). Retrieved from https://www.worldoil.com/news/2020/3/6/putin-dumps-opec-to-start-a-war-with-america-s-shale-oil-industry

McFarlane, S., & Minczeski, P. (2019, April 18). OPEC vs. Shale: the Battle for Oil Price Supremacy. Retrieved from https://www.wsj.com/articles/opec-vs-shale-the-battle-for-oil-price-supremacy-11555588826

How does fixed cost affect marginal cost?

How does fixed cost affect marginal cost? Why is this relationship important?

The Answer

A fixed cost is a cost that does not change with an increase or decrease while the amounts of goods or services produced or sold, and companies have the obligation to pay those fixed bills. In general, companies have to pay for two types of costs, fixed costs or variable costs. 

Marginal cost, on the other hand, is the change in total production cost that comes from making or producing one additional unit. Marginal cost of production includes all of the costs that vary with that level of production. For instance, if Apple needs to build a new factory in order to produce more iPad, the cost of building the factory is a marginal cost. The amount of marginal cost varies according to how many iPhone are being produced.

The marginal cost measures the change in the total cost with respect to the change in output, so a change in fixed costs does not affect the marginal cost. Suppose the fixed cost is $1,000, the variable cost is $200, and the quantity is 100 units. Then, the variable cost increase to $300, and the quantity is 200 units. The calculation for the marginal cost is:

Marginal cost = Total cost change / Quantity increased = ( $300 - $200 ) / (200 - 100 ) = $1 per unit.

As the calculation shows, the fixed cost does not affect the result since it remains unchanged. Moreover, if there are only fixed costs associated with producing goods, the marginal cost of production is zero. Because there is no change at all. However, the marginal cost of production is affected by variable costs associated with production. Just like the example shows, when the variable cost increase to $300, and the quantity is 200 units, the marginal cost starts increasing.

In the long term, while the fixed cost becomes less and less important, the marginal cost is the key to long term profitability. Focus on the marginal and slight changes that actually affect the operating, is more efficient while in the long term that fixed cost is relatively less important. We can focus on every marginal change in global warming not always compare the events to the beginning of the earth. 

A common name for fixed cost is “overhead.”

Critical Thinking Questions

A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is $1,000. What does the average fixed cost curve look like? Use your response to explain what “spreading the overhead” means.

The Answer

As we know, fixed costs are expenditures that do not change regardless of the level of production, which means whether you produce a lot or a little, the fixed costs are the same. Average fixed cost curves are typically U-shaped. Supposed fixed cost is $1,000, the average fixed cost curve will look like a downward slope curve in the first period. Because in the beginning, each unit of production tends to share and lower the total cost, or we can say that as output grows, fixed costs become relatively less important. After it meets at the lowest average cost point, the curve may start to upward since each extra production tends to pull up the total cost. Because diminishing marginal returns implies that additional units are more costly to produce. 

Suppose Bruce starts his own coffee business with a $1,000 fixed cost at first, for purchasing an espresso machine, decorating the shop, pay the rents, and POS system. If his average cost per cup of coffee, for the first 10 cups he sold, is $102 

( ($1,000 +$2 x 10) / 10 ) = $102 

*Notice that the $2 per cup is a variable that appears from per cups of coffee sold.

If he produce and sold 20 cups of coffee, the average cost per transaction are more like $52

( $1,000 + $2 x 20 ) / 20 = $52 

If he produce and sold 30 cups, the average cost is approximately $35

( $1,000 + $2 x 30 ) / 30 = approximately $35

As we can see in the beginning, his average cost per cup of coffee is pretty high. But as more and more cups of coffee be produced and sold, the fixed cost becomes less and less important and relatively small, as the variable cost grows. The growing number of denominator also tends to pull down the result. From 10, 20, to 30 as the total cost increased from 1,020 to 1,060. 

If we separate the $1,000 from the calculation, the results will be like this. For the first 10 cups, is $100 ( $1,000 / 10 )  

*Notice that the prior $2 per cup is a variable that appears from per cups of coffee sold, and now we removed it. 

For 20 cups are sold, the average fixed cost is $50 ( $1,000 / 20 )

If he produces and sold 30 cups, the average fixed cost is approximately $33 ( $1,000 / 30 ) 

As we can see in the calculations, his average fixed cost per cup of coffee is lower and lower as he produces and sold more and more cups of coffee. As the fixed cost does not change, they spread overhead to 10, 20, or 30 units.

Fixed Costs and Marginal Costs in The Short Run

High Fixed Costs in The Short Run

A company's fixed cost does not vary with the volume of production. It remains the same even if no goods or services are produced, and cannot be avoided. 

Gilead Sciences, Inc is an American biopharmaceutical company headquartered in Foster City, California that researches, develops, and commercializes drugs. Remdesivir is a broad-spectrum antiviral medication developed by Gilead, as a solution to fight the coronavirus(COV-19), and has been issued an Emergency Use Authorization (EUA) in the U.S. for those hospitalized with severe disease. But before it actually in doctors' prescriptions, the company has to pay for the huge fixed cost in the short run such as research, development, tests, paychecks for high-education scientists, professional equipment for the labs, which are all very costly. If the cure has been found very successfully, the profit is substantial and the fixed cost in the short run becomes far less important. But before that, lots of money gonna be burned on the fixed cost. The Food and Drug Administration is the oldest comprehensive consumer protection agency in the U. S. federal government. Normally, a drug has to be verified by the FDA for its legalization. Unfortunately, It may take a very long period of time. Although fails are the only way to succeed, It is costly. Suppose you hire a team consisted of scientists, working for the solution to COV-19. Those scientists work 24/7 to find the solution and the facilities inside the lab are operating and analyze the data with no rest while your lab has not actually produced any one product. As the boss, you still have to pay the bills for continuing their research.

High Marginal Costs in The Short Run

The marginal cost of production is the change in total production cost that comes from making or producing one "additional" unit. As the word "additional", It is very different from the average cost. Automobiles Ettore Bugatti was a French car manufacturer of high-performance automobiles, founded in 1909 in the then-German city of Molsheim, Alsace by the Italian-born industrial designer Ettore Bugatti. Consider each additional luxury car, the company has to pay the very high sunk cost in the short run. To produce each additional well-design sports car, the fixed cost, and the variable cost are from the consumers' customization. The consumers want a special and limited car. Every additional customization means an additional new cost of design, production, or even new patented technology. Just like the official state "Extremely powerful and very exclusive. Bugatti hyper sports cars have always been at the very pinnacle of automobile construction. They are unique pieces of the highest quality and craftsmanship, developed and manufactured with enormous attention to detail". 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Gilead Sciences. (2020, May 5). Retrieved from https://en.wikipedia.org/wiki/Gilead_Sciences

Bugatti. (2020, February 16). Retrieved from https://en.wikipedia.org/wiki/Bugatti

Bugatti. (2020, May 7). Official BUGATTI Website. Retrieved from https://www.bugatti.com/