Types of Profit
The 2 Types of Profit
What is Accounting and Economic?
MR=MC
What is the Profit Maximization Rule?
If TR>TC
What is the firm earns an economic profit?
Firms that face both Fixed and Variable Costs
What is firms operating in the Short Run?
"Per Unit" Measurements
What is Marginal and Average?
Formula for Accounting Profit
What is Total Revenue subtracted by Explicit Costs?
Change in Total Revenue divided by the Change in Quantity
What is the formula for Marginal Revenue?
If TR=TC
What is the firm breaks even and earns a normal profit?
The Shut-down Rule
What is TR<VC?
When MR= MC >/= ATC
What is Profit or break even point? (Stay Open)
Formula for Economic Profit
What is Total Revenue subtracted by Explicit and Implicit Costs?
Change in Total Cost divided by the Change in Quantity
What is the formula for Marginal Cost?
If TR<TC
What is the firm earns an economic loss?
If TR>TC or TR=TC
What is the firm should stay open?
When MR=MC between ATC and AVC
What is loss? (Stay Open)
Includes Explicit Costs only, typically fixed and variable Costs
What is Accounting Profit?
Purpose of Profit Maximization Rule
What is firm's will minimize losses?
If MR>MC
What is the firm should produce more?
If VC<TR<TC
What is the firm should stay open?
When MR=MC<AVC
What is loss? (Shut down temporarily)
Includes BOTH Explicit and Implicit Costs or one's foregone income
What is Economic Profit?
Same as Zero Economic Profit
What is Normal Profit?
If MR<MC
What is the firm should produce less?
If TR<VC<TC
What is the firm should shut down temporarily?
Firm is earning a loss in the Long Run
What is exit the market or industry?