16633 Chapter Notes - Chapter 6: Production Function, Fixed Cost, Opportunity Cost
Document Summary
Economics for today production costs chapter 6. Accounting cost and profit: an accountant measures cost and profit according to accounting principles, economists predict the decisions that a firm makes to maximize its profit. Accounting profit versus economic profit: accounting profit = total revenue total explicit costs, economic profit = total revenue total opportunity costs, total opportunity cost = explicit costs + implicit costs. Normal profit: the minimum profit necessary to keep a firm in operation, a firm that earns normal profit earns total revenue equal to its total opportunity costs, so it still makes an accounting profit. Economic profit: a firm"s economic profit equals total revenue minus total cost, total cost is the sum of the explicit costs and implicit costs and is the opportunity cost of production. If a firm incurs an economic loss, the entrepreneur receives less than normal profit.
