ECON101 Lecture Notes - Ronald Coase, Microsoft, Software

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ECON101 Full Course Notes
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ECON101 Full Course Notes
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Document Summary

Firm: an institution that hires factors of production and organizes those factors to produce and sell goods and services. A firm"s goal is to maximize profit. To measure profit, depreciation charge is subtracted from the cash surplus (revenue-expense) Depreciation is the fall in value of a firm"s capital. To calculate depreciation, accountants use revenue canada rules based on standards established by the accounting profession. Accountants measure a firm"s profit to ensure that the firm pays the correct amount of income tax and to show its investors how their funds are being used. Economists measure a firm"s profit to enable them to predict the firm"s decisions, and the goal of these decisions is to maximize economic profit. Economic profit: total revenue minus total cost, with total cost measured as the opportunity cost of production. The opportunity cost of any action is the highest valued alternative forgone.

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