ECN 104 Chapter Notes -Opportunity Cost, Production Function, Marginal Product

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Industrial organization-the study of how firm"s decisions regarding prices and quantities depend on the market condition they face. Economists normally assume that the goal of a firm is to maximize profit. Total revenue (for a firm)-the amount a firm receives for the sale of its output. Total cost-the market value of the inputs a firm uses in production. Firm"s cost of production, include all the opportunity costs of making its output of goods and services. 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. The cost of capital as an opportunity cost. Money given up per year in interest income is one of the implicit opportunity costs of helen"s business. Economic profit-total revenue minus total cost, including both explicit and implicit costs. The production function-the relationship between quantity of inputs (workers) and quantity of output (cookies).

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