ECON 1B03 Lecture Notes - Lecture 9: Diminishing Returns, Plasma Display, Marginal Product
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ECON 1B03 Full Course Notes
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The firm"s goal is to maximize its profits. Total revenue, tr- amount a firm receives for the sale of its output. Total cost, tc- market value of the inputs a firm uses in production. Cost of production- includes all opportunity costs of making g/s. Explicit costs- require direct outlay of money; can get a receipt. Implicit costs- no outlay of money; don"t get a receipt. Accounting profit- accounting profit = tr explicit costs. Economic profit- economic profit = tr explicit costs implicit costs. Since economic profit includes explicit and implicit costs, economic profits < accounting profit. Production function- shows the relationship between quantity of input used to make a g/s, and the quantity of output of that g/s. Marginal product- the input in the production process is the increase in output that arises from an additional unit of input. Mp is the slope of the total product function. Mp = total output / # of inputs.