ch7 - Chapter 7 Producers in the short-run Economic Profits...

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Chapter 7 – Producers in the short-run Economic Profits Accounting profit = Revenues - accounting costs. Economic profit = Revenues - opportunity costs. Opportunity costs include accounting costs plus… …foregone salary …foregone interest (pure return + risk premium) …foregone rent (owned buildings, special assets) Zero economic profits implies that… …a firm is doing just as well as their next best alternative. …firms will neither enter nor exit. …accounting profits will equal _____. Positive economic profits implies that… …a firm is doing better than its next best alternative. …firms will enter …accounting profits are ___. Negative economic profits implies that… …a firm is doing worse than its next best alternative …firms will exit EC120 Chapter 7 – Producers in the short-run page 1 of 8
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…accounting profits are ___. Production Production function indicates the highest output or total product (Q) that can be produced for given levels of …is expressed mathematically as Q =
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This note was uploaded on 11/17/2008 for the course EC 120 taught by Professor Zeiss during the Spring '08 term at Wilfred Laurier University .

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ch7 - Chapter 7 Producers in the short-run Economic Profits...

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