MAE101 Lecture Notes - Lecture 5: Fixed Cost, Average Variable Cost, Average Cost
Document Summary
The economic and overall goal of a firm is to maximise profits. Total revenue is the total amount (in $) a firm receives for the sale of its output. Total cost is the total amount (in $) a firm pays to purchase the inputs into production. Profit is the firm"s total revenue minus its total cost. A firms production costs includes all the opportunity costs of making its output of goods and services. Explicit costs are input costs that require a direct outlay of money by the firm. Implicit costs are input costs that do not require an outlay of money by the firm. Using own money rather than taking a loan and paying interest (opportunity cost of interest foregone). Not paying yourself a wage while you get set up (opportunity cost of your time). Economic profit refers to total revenue total costs. Accounting profit refers to total revenue explicit costs.
