ECON 0100 Study Guide - Midterm Guide: Marginal Cost, Farmer Jack, Monopolistic Competition
Document Summary
Chapter 13: the costs of production: outline. What are economies of scale : total revenue, total cost, profit. We assume that the firm"s goal is to maximize profit. Profit = total revenue (tr) total cost (tc: tr: the amount a firm receives from the sale of its output, tc: the market value of the inputs a firm uses in production, costs: explicit vs. Explicit costs: require an outlay of money. Implicit costs: do not require a cash outlay. Ex: the opportunity cost of the owner"s time. The cost of something is what you give up to get it. This is true whether the costs are implicit or explicit. Both matter for firms" decisions: economic profit vs. accounting profit. Accounting profit: = total revenue total explicit costs [only explicit] Economic profit: = total revenue total costs [explicit & implicit costs] Accounting profit ignores implicit costs, so it"s higher than economic profit: the production function.
