Ashley's econ outline...so far
Ashley *last name omitted creepy internet stakers*
Chapter 12 outline
I. Introduction- The Costs of Production
II. What are Costs?
A. Total Revenue, Total Cost, and Profit
1. Total Revenue is the amount that the firm receives for the sale of its output.
2. Total cost is the amount that the firm pays to buy inputs
3. Profit isa firm’s total revenue minus its total cost : Profit = Total revenue - Total cost
B. Costs as Oppurtunity Costs
1. Explicit costs are input costs that require an outlay of money by the firm
2. Implicit costs do not require an outlay of money by the firm
3. Biggest distinction between an accountant and an economist
a. Economists inclue both implicit and explicit costs when measuring a firm’s costs
b. Accountants keep track of the money that flows into and out of firms, therefore they often ignore implicit costs
C. The cost of capital as an opportunity cost- Almost every business has the opportunity cost of the financial capital that has been invested in the business
D. Economic Profit Versus Accounting Profit
1 Economic profit is the total revenue minus the total cost, including both explicit and implicit costs
2. Accounting profit is the total revenue minus total explicit cost
III. Production and Costs- Firms incur costs when they buy inputs to produce the goods and services that they plan to sell
A. The Production Function
1. The production function is the relationship between quantity of inputs used to make a good and the quantity of output of that good
2. People think at the margin and this is the key to understanding the decision a firm makes about how many workers to hire and how much output to produce
doesn't that sound oh so exciting?