Chapter 14 F&R Econ

Accounting profit formula?

Accounng profit = economic profit + implicit costs

A firm that produces and sales furniture can decide

How many workers to hire in both the short run and the long run.

Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-me shrimp fisherman. In calculang the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's

Implicit costs

The difference between explicit and implicit costs is that

Implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do

Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers

Labor to be variable and capital to be fixed.

Marginal cost is defined as

The addional cost that is incurred as one more unit of output is produced.

If a firm uses labor to produce output, the firm's producon funcon depicts the relaonship between

The number of workers and the quanty of output.

Which of the following is an example of an implicit cost

The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm.

Average total cost is calculated as

Total cost divided by output

The following is true of implicit costs

can typically be thought of as opportunity cost

In the long run,

fixed cost become variable

Ultimate goal of a firm is to

maximize profits

average variable cost is calculated as

total variable cost divided by output