EC 110 Lecture Notes - Lecture 21: Production Function, Marginal Product, Marginal Cost
1 Nov 2016
School
Department
Course
Professor
Document Summary
Total revenue: amount a firm receives for the sale of its output ex) cookies (firm is a cookie factory: 10,000 cookies x /cookie = ,000 total revenue. Total cost: the market value of the inputs a firm uses in production ex) flour, sugar, workers, ovens, etc. Economists consider both explicit & implicit costs in a firm"s total cost, while accountants only consider explicit costs. Explicit costs: input that requires the firm to pay out 23703 ex) $ for supplies, wages, overhead costs. Implicit costs: input that does not require firm to pay out 23703 ex) using time to earn money elsewhere. Almost every business has an opportunity cost of the financial capital that has been invested into the business (implicit cost) Economic profit: total revenue minus all opportunity cost (explicit & implicit) Is what motivates a firm to supply goods/services. Accounting profit: total revenue minus total explicit costs.
