This preview shows page 1. Sign up to view the full content.
Unformatted text preview: Econ 101 October 3, 2007 For an individual firm, the supply curve is the marginal cost curve Choosing output where market price equals marginal cost maximizes profit If P > MC then the next unit makes a profit of P-MC (positive number) If P< MC then the next unit makes a loss of P-MC (negative number) When P=MC then profits are maximized Total Cost and Economics Profits o Total costs include fixed costs, variable costs (at market price) and the opportunity cost of owned factors (land owners time, land, business, and equipment) o Product Market Conditions Competitive Cannot control price Want to produce product until price = marginal cost Accounting profits are defined as total sales revenue minus operating costs o Does not subtract opportunity costs and owners time o Accounting profits = sales revenue sales cost o Economic profits = accounting profits opportunity costs ...
View Full Document
- Fall '06