ECON 1050 Chapter Notes - Chapter 10: Sole Proprietorship, Product Differentiation, Oligopoly
8 Apr 2013
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Document Summary
Firm- an institution that hires factors of production and organizes those factors to produce and sell goods and services. Depreciation- the fall in the value of a firm"s capital. Economic profit- equal to total revenue minus total cost, with total cost measured as the opportunity cost of production. Implicit rental rate of capital is composed of the economic depreciation and forgone interest. Forgone interest: the funds used to buy capital could"ve been used for: resources supplied by the firm"s owner. Entrepreneurship: organizes a firm an makes its decisions. Normal profit is the cost of entrepreneurship and is an opportunity cost of profit, it"s how much profit the entrepreneur earns on average. Owner"s labour services: the owner of a firm might supply labour but not talk a way, the opportunity cost of the owner"s labour is the wage forgone by not taking the best alternative job.
