Types of Profit
Includes explicit costs only
Accounting Profit?
MR=MC
What is the profit maximization rule?
AFC=FC/Q
What is Formula for Average Fixed cost?
"Income Forgone"
Implicit costs are otherwise known as?
all the points of tangency of the unlimited number of short-run ATC curves
what is the graph of long-run ATC made up of?
Provides incentive for firms.
Profit includes?
In order to maximize profit
Why do firms continue to produce as long as marginal revenue is creater than marginal cost?
ATC=TC/Q
What is Formula for Average Total Cost?
The money value for one's opprotunity costs
What is Implicit Costs?
SAC
what is short-run ATC curves designated as?
"Out of Pocket Expenses"
Explicit Costs are known as?
total costs divided by quantity of output
What is average total cost?
AVC=VC/Q
What is Formula for Average Variable Costs?
Money spent on Materials, utilities, labor, rent, capital, ect.
What are Explicit Costs?
the LAC is "U" shaped
what is the shape of the long-run cost curve? (LAC)
Price x Quanity
How to find Total Revenue?
Increase in total cost from producing one more unit.
What does Marginal cost do?
AFC+AVC=ATC
Average total cost?
Fixed Costs + Variable Costs?
How to find Total Cost?
larger and larger plant size will lower per-unit-costs beyond some point. larger plants mean higher average total costs. can only go so low and then costs bump back up
why is the LAC "U" shaped?
total revenue minus total cost, including both explicit and implicit costs
What is Economic Profit?
variable cost divided by the quantity of output
What is average variable cost?
Total Revenue - Explicit Costs
How to find Accounting Profit?
when difference between a company's revenues and its explicit and implicit costs is zero
What is Normal Profit?
the law of diminishing marginal returns doesn't apply here
why does the LAC graph decrease and increase?