ECON 1000 Lecture Notes - Lecture 10: Opportunity Cost, W. M. Keck Observatory, Canada Revenue Agency

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Steven Edwards

Document Summary

A firm is an institution that hires factors of production and organizes them to produce and sell goods and services. If the firm fails to maximize its profit, the firm is either eliminated or taken over by another firm that seeks to maximize profit. Accountants measures a firm"s profit to ensure that the firm pays the correct amount of tax and to show it investors how their funds are being used. Accountants use revenue canada rules based on standards established by the accounting profession. Economists measure a firm"s profit to enable them to predict the firm"s decisions, and the goal of these decisions is to maximize economic profit. Economic profit is equal to total revenue minus total cost, with total cost measure as the opportunity cost of production. A firm"s opportunity cost of production is the value of the best alternative use of the resources that a firm uses in production.