CAS EC 101 Chapter Notes - Chapter 13: Opportunity Cost, Marginal Product, Production Function

• School: Boston University
• Department: Economics
• Course: CAS EC 101
• Professor: All

Document Summary

What are costs: total revenue, total cost, and profit. Goal of a firm is to maximize profit. Firm"s profit is the amount that it receives for the sale of its output total revenue. The amount a firm pays for inputs is total cost. Profit is a firm"s total revenue total cost. Economists speak of firm"s cost of production, they include all opportunity costs. Explicit costs: input costs that require an outlay of money by the firm. Implicit costs: input costs that do not require an outlay of money by the firm. Total cost of a business is implicit + explicit costs: the cost of capital as an opportunity cost. Important implicit cost of almost any business is opp. cost of financial capital that has been invested in business: economic profit vs. accounting profit. Economist measures a firm"s economic profit as a firm"s total revenue all opp. costs of producing the goods and services sold.