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Chapter 7 - Chapter 7 Explicit cost opportunity cost of...

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Chapter 7 – 11/6/07 Explicit cost – opportunity cost of resources employed by a firm that takes the form of cash payments Implicit cost – A firm’s opportunity cost of using its own resources or those provided b its owners without a corresponding cash payment Accounting profit – a firm’s total revenue minus its explicit costs Economic profit – A firm’s total revenue minus its explicit and implicit costs Normal profit – the accounting profit earned when all resources earn their opportunity cost Variable resource – Any resource that can be varied in the short run to increase or decrease production Fixed resource – any resource that cannot be varied in the short run Short run – a period of during which at least one of a firm’s resources is fixed Long run – a period in which all resources under the firm’s control are variable Total product – the total output produced by a firm Production function
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