3.1.10 – Lecture Notes, ECON 201

3.1.10 – Lecture Notes, ECON 201 - 3.1.10...

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3.1.10 – Lecture Notes, ECON 201 SUMMARY According to the book: Firm’s Goal: Maximize Profits Profits = Total revenue – Total Costs Economic v. Accounting Profit Total Costs: Explicit & Implicit Explicit: Paying someone else Implicit: Paying Yourself Opportunity cost = implicit + explicit cost - Production Function: technical relationship between the inputs and the outputs. o Ex: “Cookie Recipe” - Time period of analysis: o Short Run: At least 1 input is fixed o Long Run: All inputs are variable - Marginal Product = ∆ Output / ∆ Labor - Law of Diminishing Marginal Product something that applies ONLY in the SHORT RUN. SHORT RUN COSTS - Total Costs = Total Variable Costs + Total Fixed Costs - Average Costs Cost Per Unit Total Cost/Output = Average Total Cost - Average Total Cost = Average Variable + Average Fixed - Marginal Costs = Change in Cost / Change in Outputs - Example: Apple Orchard - SHORT RUN AVERAGE COST CURVE IS U-SHAPED - As you produce more, AFC will always go down
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3.1.10 – Lecture Notes, ECON 201 - 3.1.10...

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