Economics 1021A/B Chapter Notes - Chapter 10: Market Price, Opportunity Cost, W. M. Keck Observatory

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Rivers

Document Summary

Firm: institution that hires factors of production and organizes those factors to produce and sell goods and services. Depreciation: the fall in the value of a firm"s capital. Measured to enable economists to predict firm"s decisions, to maximize economic profit. Economic profit: total revenue total cost, with total cost measured as opportunity cost of production. Opportunity cost of production: value of the best alternative use of the resources that a firm uses in production. Sum of the cost of using resources: bought in market. Firm incurs oc when buys resources in the market. Firm could have bought different resources to produce some other good/service: owned by firm. Firm incurs oc when it uses its own capital. Firm could sell the capital it owns and rent capital from another firm. When firm uses its own capital, it implicitly rents from itself. Implicit rental rate: firm"s oc of using the capital it owns.