Econ 102 notes 4-13-09

Econ 102 notes 4-13-09 - Econ 102 Chapter 13 Week of The...

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Econ 102 Chapter 13 Week of 4/13/09 The Costs of Production Industrial organization The study of how firms’ decisions about P and Q depend on the market conditions Profit = total revenue – total cost Total revenue= total amount received from sale of a good Total cost= market value of inputs a firm uses in production Explicit costs= input costs that require an outlay of money by the firm Implicit costs= input costs that do NOT require an outlay of $ by the firm Ex. Opportunity costs Total cost of a business= explicit costs + implicit costs Economic Profit= total revenue – total cost, including both explicit and implicit costs Accounting Profit= total revenue – total explicit cost Thus, accounting profit is usually larger than economic profit Production function = the relationship between quantity of inputs (i.e. workers) used to make a good (i.e. cookies) and the quantity of output of that good Marginal product= the increase in output that arises from an additional unit of input
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