Microeconomics chapter 6 part 2!

What is the difference between explicit and implicit costs?

Explicit costs= Money spent; Implicit costs= money sacrificed (opportunity cost)

What is economic profit?

Revenue - Explicit cost - Implied costs (includes opportunity cost)

What is accounting profit?

Revenue - Explicit costs only

Why is economic profit smaller?

It subtracts opportunity costs (Implicit costs)

If economic profit is zero, what does that mean?

The firm earns a normal profit, enough to stay in the business

What are the three parts of the seller’s problem?

Production, Costs, and Revenues - Choose the quantity that maximizes profit.

MC →

How much should I prooduce?

AVC →

Should I shut down?

ATC →

Should I stay in the market long-run

What curve tells a firm how much to produce?

MC - Produce where MC = Price

What curve tells a firm when to shut down

AVC - shut down IF price < AVC.

What curve tells a firm long-run survival?

ATC - exit of price < ATC

When does a firm shut down in the short run?

When price < AVC

What is producer surplus?

The difference between market price and marginal cost (MC)