ECON 001 Chapter Notes - Chapter 10: Market Power, Oligopoly, Perfect Competition
Document Summary
Opportunity cost of production the value of the best alternative use of resources that a firm uses in production: value of real alternative foregone. Foregone interest: sum of the cost of using resources. Bought in the market (could have bought different resources) Owned by the firm (could have sold that capital it owned and rented it from another firm) Supplied by the firm"s owner (normal profit (cid:0) profit an entrepreneur earns on average) Depreciation the fall in value of a firm"s capital (unrelated to change in the market value of capital) Economic depreciation fall in the market value of a firm"s capital over a given period: equals market price of the capital at the beginning of the period market price at the end of the period. Economic profit = total revenue opportunity cost of production. Profit = (p q) (atc q), or.
