Chapter 13 Notes

Chapter 13 Notes - Chapter 13 Cost of production - Total...

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Chapter 13 Cost of production - Total Revenue, Total Cost, Profit We assume that the firm’s goal is to maximize profit. Profit = Total Revenue (Amount a firm receives from the sale of its output) – Total Cost (the market value of the inputs a firm uses in production) - Costs: Explicit Vs. Implicit Explicit Require an outlay of money (paying wages to workers) Implicit Do not require a cash outlay (Cost of owners time) - Economic Profit Vs. Accounting Profit Accounting profit = Total revenue minus total explicit costs Economic profit = Total revenue minus total costs (including explicit and implicit costs) Accounting profit ignores implicit costs, so it’s higher than economic profit. - The Production function Production function Shows the relationship between the quantity of inputs used to produce a good, and the quantity of that good. -
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Chapter 13 Notes - Chapter 13 Cost of production - Total...

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