Econ 101 lecture 10 4

Econ 101 lecture 10 4 - Econ 101 lecture 10 Costs of...

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Econ 101 lecture 10 4/13/11 Costs of production & firm’s profits Why? To understand how firms make decision What’s the goal of a firm? *Profit Maximization Profit = Total revenue (TR)-Total cost(Tc) Total revenue: amount a firm receives from the sale of its product TR= P.Q= price. Quantity sold Ex sell 100 cookies@$2 each =>TR=$200 Total cost: market value (price) fo input used in production Cost By cost we mean economic costs which is best though of as opportunity cost. Opportunity cost = the cost of something is what you give up to get it. Opportunity cost consist of : explicit cost +implicit cost Explicit cost- input cost that requires an outlay of money. Ex: cookies production; inputs that need to buy: flour, butter, egg, labor, and equipment => explicit cost Implicit cost- input costs that do not require an outlay of money Why not outlay? Because the firm already owns the input Two main input that produce implicit costs -Owner’s time -Owner’s capital Ex: owner of the cookies factory spends her time managing it ; she forgoes a wage of
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This note was uploaded on 09/29/2011 for the course ECON 101 taught by Professor Pgking during the Spring '08 term at S.F. State.

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Econ 101 lecture 10 4 - Econ 101 lecture 10 Costs of...

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