ECN 104 Chapter 13: Chapter 13 - The Costs of Production

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Tsogbadral Galaabaatar

Document Summary

we assume that the firm s goal is to maximize profit. explicit costs require an outlay of money, e. g. , paying wages to workers. Implicit costs do not require a cash outlay, e. g. , the opportunity cost of the owner s time. The cost of something is what you give up to get it. this is true whether the costs are implicit or explicit. case 1: borrow ,000 explicit cost = interest on loan. case 2: use ,000 of your savings, borrow the other ,000 explicit cost = (5%) interest on the loan implicit cost = (5%) foregone interest you could have earned on your ,000. accounting profit total revenue minus total explicit costs. economic profit total revenue minus total costs (including explicit and implicit costs) accounting profit ignores implicit costs, so it s higher than economic profit. Costs in the short run & long run.