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Eco 100 ch7/8

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Department
Economics
Course
ECO100Y5
Professor
None
Semester
Fall

Description
Ch7&8 1. Organization of firms Multinational enterprises (MNEs,跨国公司): firms that have operations in more than one country 2. Financing of firms • Equity- dividends • Debt-bond 3. Goals of firms: the desire to maximize profits is assumed to motivate all decisions made within a firm, and such decisions are assumed to be unaffected by the peculiarities of the persons making the decisions and by the organizational structure in which they work 4. Production • Inputs to the car firm that are outputs from some other firm, such as spark plugs, electricity, and steel • Inputs that are provided directly by nature, such as land • Inputs that are provided directly by people, such as the services of workers and managers 1 • Inputs that are provided by the factories and machines used for manufacturing cars  Production function: Q[the flow of output]=f(L[the flow of labour service] ,K[the flow of capital service]) 生产函数是指在一定时期内,在技术水平不变的情况下,生产中所使用的各种生产 要素的数量与所能生产的最大产量之间的关系。 Eg1. A professional basketball team produces baskets B, by combining forwards F and guards G. The production function is B = f( F, G). Assume that each input exhibits diminishing marginal productivity. Suppose the Toronto Raptors trade Jose Calderon, one of the team’s four guards, to the Boston Celtics for Kevin Garnett, a forward. Graph Toronto’s marginal product curve for forwards and their marginal product curve for guards. How would this trade affect the two curves? Under what (economic) conditions would this trade increase the number of baskets scored by the team? 5. Economic versus accounting profits  Economic profits: the difference between the revenues received from the sale of output and the opportunity cost of the inputs used to make the output. Negative economic profits are called economic losses.  Accounting profits(会计利润是指企业所有者在支付除资本以外的所有要素报 酬之后剩下的利润)= revenues- explicit costs(显成本) 2  Economic profits= revenues- (explicit costs + implicit costs)= accounting profits – implicit costs economic profit 和 accounting profit 不是一个概念,在充分竞争的市场环境 中,economic profit 经济学利润应该为 0,而会计利润不是  Economists include both implicit and explicit costs in their measurement of profits whereas accounting profits include only explicit cost. Economic profits are therefore less than accounting profits.  Firms may have positive accounting profits even though they have zero economic profits.  If a firm’s accounting profits represent a return just equal to what is available if the owner’s capital and time were used elsewhere, then opportunity costs are just being covered.  Accounting profit is the difference between the firm’s revenues and its explicit costs, including labour costs, capital costs, and the costs of intermediate inputs. It does not include the opportunity cost.  Opportunity cost of time Opportunity cost of capital 6. Profit-maximizing output: π=TR (total revenue)-TC (total cost) Profit maximization, the MR= MC Approach.. 但係下面只係寫.. MR>ME its economic profit increases if output increases MRaverage, average must be rising If marginal
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