Technology, Production, Costs

Technology, Production, Costs - Chapter 10 Economics Whats...

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11/1/11 Chapter 10 Economics What’s behind the supply curve: Technology, Production and costs We assume that the firm’s goal is to maximize profit. Profit = Total revenue ( the amount a firm receives from the sale of its output) Total cost (the market value of the inputs a firm uses in production 2) Costs: Explicit vs. Implicit Explicit costs  require an outlay of money, e.g., paying wages to workers. Implicit costs  do not require a cash outlay, e.g., the opportunity cost of the  owner’s time. Both matter for firms’ decisions. Economic Profit vs. Accounting Profit Accounting profit  = total revenue minus total explicit costs Economic profit  = total revenue minus total costs (including explicit and implicit costs) Accounting profit ignores implicit costs, so it’s higher than economic profit. The Production Function
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Technology, Production, Costs - Chapter 10 Economics Whats...

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