ECN 104 Chapter Notes - Chapter 13: Marginal Product, Profit Maximization, Fixed Cost
Document Summary
A firms goal is to maximize profit. Cost: explicit vs implicit: explicit: require an outlay of money. accounting profit is the difference of the total revenue and the total explicit costs: implicit: do not require a cash outlay. economic profit is the difference of the total revenue and the total cost (explicit and implicit) Shows the relationship between the quantity of inputs used to produce a good and the quantity of outputs of that good. (represented by a table, equation, or graph) Marginal product of an input: is the increase in output arising from each additional unit of that input (holding everything else constant) Importance: for each additional input, it is up to the managers to decide if the rise of outputs is beneficial. Diminishing marginal product: the marginal product of an input declines as the quantity of the input increases (holding everything constant) mpl diminishes as.