Chapter 8 Notes

Chapter 8 Notes - eco202 Prof Jui-Chi Huang CHAPTER 9 THE...

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eco202 Prof. Jui-Chi Huang eco202ch9Spr04.doc CHAPTER 9 THE COSTS OF PRODUCTION 1. Economic Costs a. Economic costs are the payments to a firm must make, or the incomes it must provide, to attract the resources it needs away from alternative production opportunities. b. Explicit costs vs. implicit costs: Accounting Economic Profit profit Payment (cost) to entrepreneurial ability Total revenue (P x Q) Payments (costs) to land, capital, labor Total cost or Economic costs ± Explicit costs – monetary payments for the use of resources owned by others . ± Implicit costs – monetary payments for the self-employed or owned resources that could have earned in their best alternative use. ± Economic costs (or opportunity costs) are explicit cost + implicit costs. c. Economics profits (or pure profits) = total revenue – economic cost . 2. Short Run vs. Long Run a. Short run – fixed plant capacity. b.
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This note was uploaded on 06/26/2009 for the course ECON 205 taught by Professor Kamrany during the Fall '07 term at USC.

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Chapter 8 Notes - eco202 Prof Jui-Chi Huang CHAPTER 9 THE...

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