ECON 1B03 Lecture Notes - Lecture 7: Fixed Cost, Cost, Marginal Product
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22 Oct 2018
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Total revenue (tr) amount a firm receives from the sale of its output. Total cost (tc) market value of inputs a firm uses in production. Profit () a fir(cid:373)"s total revenue total cost. Economic profit includes total opportunity costs ( = tr (implicit + explicit)) and happens when tr > Accounting profit costs include only explicit costs ( = tr (explicit)) Economic cost of production includes all the opportunity costs of making its output goods and services (explicit & implicit) Positive economic profits super high, unexpected profits for firms in that industry (attract entrepreneurs) Economic losses negative profits (firms leave industry) Normal economic profits (expected) zero economic profits (no new firms will enter, and none will leave, firms are still making an accounting profit) Production function shows the relationship between quantity of inputs used to make a good and the quantity of output of that good (assume firms use most efficient technology)
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