ECON101 Study Guide - Market Power, Monopolistic Competition, Nash Equilibrium

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ECON101 Full Course Notes
ECON101 Full Course Notes
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Firm institution that has a goal to maximize profit. Technology constrains available resources & technology. Information constrains limited information about past, present and future about firms production. Market constraints limited demand for firm"s output. Explicit costs direct cost of purchasing resources. Accounting cost = explicit cost + conventional depreciation. Accounting profit = revenues (explicit cost +conventional depreciation) Accounting profit= total revenue (tr) explicit cost. Opportunity costs = explicit cost + implicit costs. Economic profit = revenues - (explicit + implicit costs) Implicit rent rate: economic depreciation (change in the market value of capital) + forgone interest, wage income forgone + normal profit. ** normal profit is part of implicit costs, economic profit (when positive) is over and above normal profit. ** economic profit of 0 is the same as a normal accounting profit (tr = explicit + implicit costs) Economic profit = total revenue (tr) (implicit +

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