ECF1100 Lecture Notes - Lecture 8: Average Cost, Marginal Product, Marginal Cost

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rosebadger52

18 Jul 2018

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Profit is the total revenue minus total cost. Economists normally assume that the goal of a firm is to maximise profit and they find that this assumption works well in most cases. When a cost involves money flowing out of the firm, it is called an explicit cost. The opportunity costs of resources owned and used by the firm (or its owners) are i(cid:373)pli(cid:272)it (cid:272)osts; for e(cid:454)a(cid:373)ple, the opportu(cid:374)it(cid:455) (cid:272)ost of a(cid:374) e(cid:374)trepre(cid:374)eur"s la(cid:271)our. Entrepreneur invests ,000 of her savings in a factory. If this money had instead been deposited in a savings account paying. 5 per cent interest, the entrepreneur would have earned ,000 per year. An economist views the ,000 in forgone interest as a cost. An accountant, however, will not show this ,000 as a cost because no money flows out of the business to pay for it. Short run: period of time during which at least one of the firm"s inputs is fixed.

Related Questions

Question 01

A firm pays in cash $250000 in wages,$55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500peryear and if he lent out his money capital to somebody else in a similarly risky business, he would at most receive $16600 per year. Keeping in view the above information:

(A) Calculate:

a) The explicit cost of the firm.

b) The implicit cost of the firm.

c) The total cost of the firm.

(B) If the entrepreneur received $495680 from selling his year's output, then calculate his total profit.

(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?

Question 02

(A) Find the value of multiplier if:

a)MPC = 0.39

b)MPS = 0.64

(B) If the value of the multiplier is 2.49 then find out:

a)MPC

b)MPS

(C) What is the relationship between the value of multiplier and MPC?

(D) Find the change in the equilibrium level of output when there is a $25 increase in investment spending and the PC is 0.75.

apricotfly173

Question 01
A firm pays in cash $250000 in wages, $55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500 per year and if he lent out his money-capital to somebody else in a similarly risky business, he would at most receive $16600 per year. Keeping in view the above information:
(A) Calculate:
a) The explicit cost of the firm.
b) The implicit cost of the firm.
c) The total cost of the firm.
(B) If the entrepreneur received $495680fromselling his year's output, then calculate his total profit.
(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?

Question 02
(A) Find the value of multiplier if:
a) MPC = 0.39
b) MPS = 0.64
(B) If the value of the multiplier is 2.49 then find out:
a) MPC
b) MPS
(C) What is the relationship between the value of multiplier and MPC?
(D) Find the change in the equilibrium level of output when there isa$25 increase in investment spending and the MPCis0.75.

cyanotter562

Question 01
A firm pays in cash $250000 in wages, $55430 in interest on borrowed money capital and $74320 for the yearly rental of its factory building. If the entrepreneur worked for somebody else as a manager, he would earn at most $44500 per year and if he lent out his money-capital to somebody else in a similarly risky business, he would almost receive $16600 per year. Keeping in view the above information:

(A) Calculate:
a) The explicit cost of the firm.
b) The implicit cost of the firm.
c) The total cost of the firm.

(B) If the entrepreneur received $495680 from selling his year's output, then calculate his total profit.

(C) What will be the total profit if the entrepreneur's total revenue were $413934 instead?
(Marks: A = 2+2+2, B = 2, C = 2)

Question 02

(A) Find the value of multiplier if:
a) MPC = 0.39
b) MPS = 0.64

(B) If the value of the multiplier is 2.49 then find out:
a) MPC
b) MPS

(D) Find the change in the equilibrium level of output when there isa$25 increase in investment spending and the MPC is 0.75.

crimsonwallaby801

ECF1100 Lecture Notes - Lecture 8: Average Cost, Marginal Product, Marginal Cost

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