ECON 2000 Chapter : Ch 8 Notes
Document Summary
Economic profit = total revenue - explicit costs - implicit costs. Accounting profit = total revenue - explicit costs only. Economic profit = accounting profit - implicit costs. Normal profit: normal profit: when the profit from a firm is equal to the opportunity cost of capital, the owner could have invested these resources elsewhere. Normal profit is equivalent to an implicit cost. It is earned if economic profit is zero, which, maybe surprisingly, is the typical case: a productive activity gets an economic profit only if it earns more than its opportunity cost. Thus the owner is willing to undertake the risk of suffering economic losses. Market structure: market structure: the number and relative size of firms in an industry, the market structures range from monopoly at one extreme to perfect competition at the other extreme. Most real-world firms are along the continuum of imperfect competition.
