L5-ProductionCost

L5-ProductionCost - The Costs of Production Chapter 13 1...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
The Costs of Production Chapter 13
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. PROFITS AND OPPORTUNITY COST 1. How do economists define costs of production? 2. Production and costs 3. Various measures of cost 4. Cost curves and their shapes
Background image of page 2
Total Revenue, Total Cost, and Profit z Total Revenue The amount a firm receives for the sale of its output. z Total Cost The market value of the inputs a firm uses in production. z Profit is the firm’s total revenue minus its total cost. Profit = Total revenue Profit = Total revenue - - Total cost Total cost
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Costs as Opportunity Costs z A firm’s cost of production includes all the opportunity costs of making its output of goods and services. z An opportunity cost of something is what you give up to get that something. A barber owning a barber shop A professor mowing the lawn.
Background image of page 4
Explicit and Implicit Costs z A firm’s cost of production include explicit costs and implicit costs. Explicit costs are input costs that require a direct outlay of money by the firm. Implicit costs are input costs that do not require an outlay of money by the firm.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
z Economists measure a firm’s economic profit as total revenue minus total cost, including both explicit and implicit costs. z Accountants measure the accounting profit as the firm’s total revenue minus only the firm’s explicit costs. z
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 20

L5-ProductionCost - The Costs of Production Chapter 13 1...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online