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Lecture 73

ECON 1010 Lecture 73: Lecture 73

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ECON 1010
Laura K.Brown

o982 1. Because the accountant ignores the implicit costs, accounting profit is usually larger than economic profit 2. For a business to be profitable from an economists standpoint, total revenue must cover all the opportunity costs, both implicit and explicit 3. A firm making positive economic profit will stay in business 4. It is covering all its opportunity costs and has some revenue left to reward the firm owners 5. When a firm is making economic losses (when the economic profits are negative), the business owners are failing to make enough to cover all the costs of production 6. Unless conditions change, the firm owners will eventually close the business down and exit the industry Production and Costs: 1. Firms incur costs when they buy to produce the goods and services that they plan to sell The Production Function: 1. Production function: the relationship between the quantity of inputs used to make the good and the quantity of outputs
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