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Unformatted text preview: Chapter 12: Production and Cost Analysis I • Fi rm is an economic institution that transforms factors of production into goods and services. o Organize factors of production o Produce good and services o Sell produced goods and services • Profit = TR – TC • Accounting profit as explicit revenue less explicit cost • Implicit cost include t cost of the factors of production provided by owners of the business • Total cost is explicit payments to the factors of production plus opportunity cost of the factors provided by the owners of the firms. • Implicit revenues include increase in value of assets • Total revenue is the amount a firm receives for selling its product or service plus any increase in the value of the assets owned by the firm • Economic profit = explicit and implicit revenue – explicit and implicit cost • A long run planning decision in which a firm chooses the least expensive method of production from among all possible methods • Short run adjustment decision in which a firm adjusts its long run planning...
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This note was uploaded on 02/23/2011 for the course ECON 2010 taught by Professor Moonjung during the Spring '09 term at UVA.
- Spring '09