Microeconomics Chapter 13 Class Notes

Microeconomics Chapter 13 Class Notes - Total Revenue,...

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Total Revenue, Total Cost and Profit. We assume that the firm’s goal is to maximize profit. Profit= Total Revenue-Total Cost π =--> -(<--) TR TC Implicit costs do not require a cash outlay e.g. The opportunity cost of the owner’s time. Case 1: Explicit Cost= 5000 Interest on loan (5% of that Loan). Case 2: Implicit Cost = 2000(5%) forgone interest you could have earned on your 40,000$. In both Cases, Total Cost (Exp+Imp) costs are 5000.
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Minus total Explicit Costs Economic Profit: Total Revenue minus total costs (including explicit and implicit costs. ∏= TR- (Exp+Imports.Costs ). Economic Profit= 0 Perfectly Comp. Markets. Ac Proft > the economic Profit. A) When you rent your office space: The Accounting Profit, if you are renting you are paying (explicit cost), that payment has increased 500$ per month. ∏= Tr-EC would change, EC would decrease. Changing it by 500. Economic Profit will also be going to fall by 500. Since TR changes. B) Accounting Profit will not change since in the equation (∏= Tr-EC) EC will not change, it remains constant. But the economic Profit,
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Microeconomics Chapter 13 Class Notes - Total Revenue,...

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