Chapter 13 Knowledge Building.docx

# Chapter 13 Knowledge Building.docx - Chapter 13 Knowledge...

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Chapter 13 Knowledge Building Questions: 1. What is the formula to calculate profits? Profit formula = Total revenue –Total cost 2. Define Explicit and Implicit Costs. Explicit costs are expenses that require payment to be made, which lessens the amount of money your business has in the bank (ex. Rent, payroll, etc.) Implicit costs are implied costs where you don’t pay in cash and it’s not recorded in the company’s books. 3. Define Economic Profit and Accounting Profit. Economic profit is the total amount of revenue minus total cost (this includes both explicit and implicit profits). Accounting profit is total revenue minus total explicit cost. 4. Define Production Function, Marginal Product, and Diminishing Marginal Product. Production function is a graph or equation that shows the relationship between the physical inputs or outputs of a business. Marginal product is the output that results from an additional unit of a factor of production such as a machine or labor hour, when all the other factors stay the same. Diminishing Marginal product is

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