ECON 111 Lecture Notes - Lecture 8: Constant Capital, Average Variable Cost, Average Cost

• School: Queen's University
• Department: Economics
• Course: ECON 111
• Professor: Ugurhan Gazi Berkok

Document Summary

Money raised separate from real capital: equity (provided by owners of firm) Requires funds in return for shares, stock or equities (paid in dividends: debt (borrowed from outside creditors)"s. Give out ious like bonds - obligation to pay principle & interest. Be socially responsible & to stockholders retain/maximize profits & do not risk resources. Intermediate products - outputs used as inputs by other producers in further stages: mining & manufacturing. Production function - technological relationship between inputs/outputs: q = f(l,k, q is flow of output, k is flow of capital services, l is flow of labour services, f is production. Accounting profit = revenues - explicit costs. Economic profit (pure) = revenues - (explicit + implicit costs) Implicit costs - opportunity cost of owner"s time, capital. If revenues > opportunity costs, firms earn pure economic profits: affect free-market system - signal whether resource should be moved to other uses (maximize profit) Profits as output depends on revenues & costs.