MGEA02H3 Chapter Notes - Chapter 7: Average Variable Cost, Diminishing Returns, Marginal Product

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA02H3
• Professor: Gordon Cleveland

Document Summary

The money a firm raises for carrying on its business is sometimes called its financial capital. The basic types of financial capital used by firms are equity and debt. equity is the funds provided by the owners of the firm. debt is the funds borrowed from creditors outside the firm. all firms are assumed to be profit-maximizers, seeking to make as much profit for their owners as possible. each firm is assumed to be a single, consistent decision-making unit. 7. 2 product ion, costs, and prof i ts. The production function describes the technological relationship between inputs that a firm uses and the output that it produces. accounting profits = revenues explicit costs. economic profits (pure profit) = revenues (explicit costs + implicit costs) Implicit costs are just as important as explicit costs. Economists include both implicit and explicit costs in their measurement of profits, whereas accounting profits include only explicit costs.