Integration of any economy into the world economy depends on a number of factors. Economic potential of the country, stage of technical and economic development and human resources are among the most important ones. Nowadays Russia does not belong to powerful states: its share in the world gross domestic product is only 2,6%.
Material and technical base has not been renewed for many years. The average age of equipment at the plants is 16 years, which is two times more by the world standards. Its wear is almost 70 %.
Nowadays the structure of international trade is such that Russia trades mainly in natural resources. Our country possesses 13 % of the world reserves of oil, 36 % of natural gas, 12 % of coal. But Russia won’t be able to increase volumes of deliveries of natural resources in the nearest future. Tempos of growth of world economy are expected to increase and new modern technologies will reduce demand for raw materials and power resources.
Nowadays, manufacturing industries and branches of Fuel-Power Complex generate half of all currency. Russian manufacturing branches possess an important competitive edge, that is unique advanced technologies which are based on the achievements of Russian science. Such technologies are possessed mainly by Military-Industrial Complex. The plants of the military complex produce products which can be competitive in the world market. Thanks to military industry the export ratio of products of manufacturing branches makes 10 %.
Production Costs
Production costs are the costs of making factor input into higher value outputs of goods and services. The costs of manufacturing products include costs of raw materials, labour costs, depreciation of plant and equipment, rent, lighting, and heating of factory buildings.
It is important to say that factor inputs can be combined in a variety of ways to produce the same amount of output. One method which is technically the most efficient is the one which uses only small amounts of labour, while another method may employ large quantities of labour and only a little capital. In physical terms, the method which is technically the most efficient is the one which uses the fewest inputs. Economists, however, are more interested in the cost aspect of the input-output relationship, specifically the least costly way of producing a given output.
To achieve the highest efficiency, that is, the optimal relationship between factor inputs and outputs of goods and services, the economist analyzes the relationship between the cost of factor inputs and the cost of output in a firm. In order to determine the cost of producing a particular output it is necessary to know not only the required quantities of various inputs but also their prices. The factor prices a firm must pay in order to buy units of these factors will depend upon the interaction of the forces of demand and supply in factor markets.
UNIT 2
