CH-13 PPT - The Costs of Production Chapter 13 M...

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Unformatted text preview: The Costs of Production Chapter 13 M icroeconomics P R I N C I P L E S O F P R I N C I P L E S O F N. Gregory Mankiw N. Gregory Mankiw Market Structure A competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. A monopoly is firm that is the sole seller of a product without close substitutes Monopolistic competition is a market structure in which many firms sell products that are similar but not identical Oligopoly is a market structure in which only a few sellers offer similar or identical products A word of warning: This topic is dry and technical. To be honest, one might even call it boring. Explicit and Implicit Costs Explicit costs are input costs that require an outlay of money by the firm. Implicit costs are input costs that do not require an outlay of money by the firm. Employee Wages 60,000 Raw Materials 100,00 Explicit Costs 160,000 Rent 20,000 Your Wages 50,000 Implicit Costs 70,000 Total Opportunity Cost 230,000 Economic profit equals total revenue minus total cost, including both explicit and implicit costs. Accounting profit equals total revenue minus explicit costs. Economic and Accounting Profit Economic profit equals total revenue minus total cost, including both explicit and implicit costs....
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CH-13 PPT - The Costs of Production Chapter 13 M...

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