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Chapter 1: Managers, Profits, and Markets
Chapter 2: Demand, Supply, and Market Equilibrium
Chapter 3: Marginal Analysis for Optimal Decision Making
Conclusion
Chapter 1: Managers, Profits, and Markets
Tesla Motors Inc. is a company engaged in the production, development, design, and sales
of multifunctional electric vehicles and the advanced dynamic system units of electric
vehicles. This is a publicly traded on NASDAQ. Tesla Motors was established by Elon
Musk and J. B Straubel in 2003, and is located at 3500 Deer Creek Ed Palo Alto
CA94070（Wiki Pedia）.
We know from the financial statement of Tesla Motors that the total assets of the company
is $2.4 billion. Compared with last year, this is an increase of $1.3 billion. (Tesla Motor
annual report, 2013). This data indicated that the company added more investment this
year for manufacturing in the future. The costs produced in this process include the
resources used for manufacturing, sales, managing and so on to keep the company running.
This is referred as Opportunity Cost. It means the cost of an alternative that must be
forgone in order to pursue a certain action. (Thomas & Maurice)
Put another way, the opportunity costs can be regarded as the benefits received by taking
an alternative action. It is the difference in return between a chosen investment and one
that is necessarily passed up: for example, investment in a stock that returns a paltry 2%
over the year. In placing the money in the stock is giving up the opportunity of another
investment - say, a risk-free government bond yielding 6%. In this situation, opportunity
cost is 4%. Similarly, the financial statement of Tesla Motors, Inc. shows the total cost.
This is not the Economic costs, but rather the explicit costs. Explicit costs mean that
monetary opportunity costs of using market-supplied resources. (Thomas & Maurice) In
real life, we have some non-monetary opportunity costs of using owner-supplied resources.
We call that Implicit costs. From this concept, we can know that the total cost from the
financial statement is just explicit costs; it does not reflect the real profits. Tesla Motors’
land, plants, and other assets that the company uses to manufacture, sell, and manage the
company are called “implicit costs". This means what a firm must give up in order to use
which it neither purchases nor hires. It is the opposite of explicit costs, which is expended
directly. If we want to know the real cost, we need to use the knowledge of Managerial
