Economics 1021A/B Chapter Notes - Chapter 10: Oligopoly, Perfect Competition, Economic Efficiency
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ECON 1021A/B Full Course Notes
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Firm: an institution that hires factors of production and organizes those factors to produce and sell goods and services. Economists measure a firm"s profit to enable them to predict its decisions, and the goal of these decisions is to maximize economic profit. Economic profit = total revenue total cost. Total cost is measured as the opportunity cost of production. Oc is the highest valued alternative forgone. Opportunity cost of production is the value of the best alternative use of the resources that a firm uses in production. Oc of production is the sum of the cost of using resources: A firm incurs an oc when it buys resources in the market, and the amount spent is. Oc of production because the firm could"ve bought different resources. The firm"s opportunity cost of using the capital it owns is the implicit rental rate of capital.