ECON 1000 Chapter Notes - Chapter 10.1: Opportunity Cost, W. M. Keck Observatory

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The irm and its economic problem: firm insituion that hires factors of producion and organizes those factors to produce and sell goods and services, the firm"s goal. Failure to do so, irm gets eliminated: accouning proit. Using accouning to discover revenue: economic accouning. Measure irm"s proit to make sure irm pays correct amount of income tax. Economic proit = total revenue total cost. Total cost = opportunity cost of producion: firm"s opportunity cost of producion. Opportunity cost of producion is the sum of the cost of using resources: Bought in the market: incurs opportunity cost when buying resources in the market. Could have bought other resources with the money used to buy the resources. Resources owned by the irm: incurs opportunity cost when uses its own capital. Could have sold the capital and rented a capital from another irm. When using own capital, implicitly rents it from itself.

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