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ECN 104 Chapter Notes - Chapter 13: Marginal Product, Profit Maximization, Fixed Cost

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School
Ryerson University
Department
Economics
Course
ECN 104
Professor
Eric Kam

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Document Summary

A firms goal is to maximize profit. Cost: explicit vs implicit: explicit: require an outlay of money. accounting profit is the difference of the total revenue and the total explicit costs: implicit: do not require a cash outlay. economic profit is the difference of the total revenue and the total cost (explicit and implicit) Shows the relationship between the quantity of inputs used to produce a good and the quantity of outputs of that good. (represented by a table, equation, or graph) Marginal product of an input: is the increase in output arising from each additional unit of that input (holding everything else constant) Importance: for each additional input, it is up to the managers to decide if the rise of outputs is beneficial. Diminishing marginal product: the marginal product of an input declines as the quantity of the input increases (holding everything constant) mpl diminishes as.

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Related Questions

Accounting profit is equal to total revenue minus the explicit cost of producing goods and services while economic profit is the difference of total revenue minus the sum of both explicit and implicit costs. Therefore, the economic profit

1. is always at least as large as accounting profit if the implicit cost is greater than zero.

2. is always less than accounting profit if the implicit cost is greater than zero.

3. will always exceed accounting profit.

4. will always equal to accounting profit.

For a firm, the production function represents the relationship between
A. quantity of inputs and total cost
B. quantity of inputs and quantity of output
C. quantity of output and total cost
D. implicit costs and explicit costs

36. Which of the following is false? (a) Economic profit = Total revenue - Total cost. (b) Accounting profit = Economic profit + Implicit cost. (c) Accounting profit = Total revenue + Explicit cost. (d) Economic profit = Accounting profit - Explicit cost.