Cost of Production
Given: A short-term view of a single producer’s production capabilities, certain of the costs are fixed, while others vary with output.
Assumes production capacity and technology are fixed.
To justify the production of some quantity Q, the Realized Effective Value to the Producer must at least cover the costs of production.
If the Realized Effective Value (per unit quantity) to the Consumer is in excess of the costs of production to the producer, then (ceteris paribus) the Total Effective Value (Health-Units) would be increased by an increase in the produced quantity until the Costs of Production equals the Realized Effective Value per unit quantity.
