ECON 1B03 Chapter Notes - Chapter 7: Variable Cost, Marginal Product, Production Function

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

The goal of every firm is to maximize profit, which means minimizing costs. Profit: profit = total revenue total costs. Minimizing costs: financial strategy that aims to achieve the most cost-effective way of delivering goods and services to the required level of quantity. Firms will try to produce the quantity of output that minimizes the cost of producing each good. Total costs and total opportunity costs = explicit + implicit costs. Explicit costs: things you can get a receipt for. Implicit costs: for things you gave up but you can"t get a receipt for because you never gave physically gave up. Economic costs are bigger than accounting costs, and therefore economic profits are smaller than accounting profits. Positive economic profits: are super high, unexpected profits or firms in that industry. These are profits that attract entrepreneurs to the industry and induce new firms to enter the market. Firms that consistently earn losses will eventually leave the industry.