Econ february 22

Econ february 22 - February 22nd, 2012 Today and next two...

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February 22 nd , 2012 Today and next two lectures: Cost I. Perspective Firms goal: maximize total profit Can be major corporations, shareholders with stocks Total profit: ( TT [pi]) Total profit= total revenue – total cost II. Basic Principles of Cost 1. Cost relates to a decision ex: decision to produce one more output- should you increase or not? What is the cost of producing an additional product? Ex: cost of changing your major 2. Cost is opportunity cost ex: decide to keep business or sell the business for 100k by deciding to keep the business operating, sacrificing the 100k (opportunity cost) 3. Cost is measured in dollars 4. Cost is a flow (for firms) stock variable: quantity that can be measured at a moment in time ex: wealth; how many gallons of water in the tub flow variable: process that takes place over a period in time ex: net worth ; saving (rate at which your adding to your net); revenue; profit; COST ex: the rate at which water is flowing into the tub (the additional flow of water into the
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This note was uploaded on 02/28/2012 for the course ECON UA-2 taught by Professor Lieberman during the Spring '12 term at NYU.

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Econ february 22 - February 22nd, 2012 Today and next two...

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