ECON 1B03 Lecture Notes - Lecture 7: Physical Capital, Diminishing Returns, Graph Of A Function

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4 Jan 2017

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ECON 1B03 Full Course Notes

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Profit = total revenue total costs: firms want to maximize profit. Amount a firm receives for the sale of its output. The market value of the inputs a firms uses in production. A fir(cid:373)"s opportunity costs of making its output of goods: explicit costs requires a direct outlay of money and you can get a receipt. Implicit costs no outlay of money and no receipt available. Used by economists: total revenue total costs. Used by accountants: total revenue total costs, only includes explicit costs. Accounting profit is larger than economic profit: because economic costs are bigger than. Very high unexpected profits for firms in an industry: attracts new entrepreneurs to the industry. Negative profits: firms that consistently earn losses will eventually leave the industry. Zero economic profits: profits you expect for firms in an industry, no new firms want to enter, no existing firms want to exit, the firm is still making accounting profit.

Related Questions

5. Economic profit is equal to

a. total revenue minus the explicit cost of producing goods and services.

b. total revenue minus the opportunity cost of producing goods and services.

c. total revenue minus the accounting cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

6. Accounting profit is equal to

a. marginal revenue minus marginal cost.

b. total revenue minus the explicit cost of producing goods and services.

c. total revenue minus the opportunity cost of producing goods and services.

d. average revenue minus the average cost of producing the last unit of a good or service.

7. Economic profit

a. will never exceed the accounting profit.

b. is most often equal to accounting profit

c. is always at least as large as accounting profit.

d. is a less complete measure of profitability than accounting profit

8. Which of the following expressions is correct?

a. accounting profit = total revenue - explicit costs

b. economic profit = total revenue - implicit costs

c. economic profit = total revenue - explicit costs

d. Both a and b are correct

Scenario 13-2:

Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3% interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50. Also during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000.

9. Zach's accounting profit for the year was

10. Zach's economic profit for the year was

Scenario 14-1:

As part of an estate settlement, Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business; her salary at Lucky.Com Inc. was $75,000 per

11. At the end of the first year of operating her new business, Mary's accountant reported an accounting profit of $150,000. What was Mary's economic profit?

The difference between total revenue and total cost is _______________________________

20. . A perfectly competitive firm is definitely earning an economic profit when: ________________

A) MR > MC. B) P > ATC. C) P > MC. D) P > AVC.

-Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits are:_________________________________________________

-For the economist, total cost includes______________________________ for an economic profit

-Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation accounting profit is:_______________________________________________________________

-Identify the following market structure

-A market with no close substitutes ____________________________________

-A market that focuses on differentiated products_______________________

-A market with one seller______________________________

-A market where there is collusion________________________

-A market that involves the auto industry_____________________

-A market where you are a price taker_____________________________

-A market where advertising is a strong incentive____________________

Why can fixed costs be considered as an entry fee?

rubypig230

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

all of the time
some of the time
on rare occasions
none of the time

2. Economics Profit is:

the same as accounting profit
sales minus explicit costs and implicit costs
sales minus variable costs and fixed costs
opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

monopoly
oligopoly
perfect competition
monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

identical products
perfect mobility
perfect knowledge
price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

true
false

emeraldwombat313

ECON 1B03 Lecture Notes - Lecture 7: Physical Capital, Diminishing Returns, Graph Of A Function

ECON 1B03 Full Course Notes

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