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