Economics 1021A/B Chapter Notes - Chapter 10: W. M. Keck Observatory, Market Power, Monopolistic Competition
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10 Jan 2017
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The firms problem is always what to produce and how to produce it. Accountants measure a firm"s profit to ensure that the firm pays the correct amount of tax and to show its investors how their funds are being used: accounting profit equals total revenue minus total cost. Accountants use revenue canada rules based on standards established by the accounting profession. Tend to look at explicit costs: explicit costs are direct payments made to others in course of running a business. Depreciation is the fall in the value of the firm"s capital. Economists measure a firm"s profit to predict the firms decisions. They assume that the goal of these decisions is the maximize economic profit. Economic profit total revenue minus total cost: total cost is measured as the opportunity cost of production. The opportunity cost of any action is the highest valued alternative foregone.
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