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Unformatted text preview: π = Σ (Tri – Tci)/(1+i)^i = the definition of profit with managerial decision making Accounting profit vs. Economic Profit Decision making is based on econ profit not acct Explicit cost: money paid, require direct payments (rent, wages) Implicit cost: opportunity cost, do not require payment (Use your own house as an office) TR (sales rev) – (explicit cost/acct profit) TR (sales rev) – (imp cost/econ profit) Total cost = imp cost + exp cost (opportunity cost) Why do we need profit? Innovations allow firms to exist (R&D) Rist of uncertainty Monopoly 00:51 00:51...
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- Spring '12
- Economics, term profit maximization, Economic Profit Decision