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What is the formula for profit?
Profit= total revenue - total cost
explicit cost
explicit cost are monetary costs like rent, materials, and salaries
implicit cost
implicit cost is opportunity cost. What else you could have done with that time and resources
accounting cost
accounting cost only counts for explicit cost
economic cost
economic cost includes explicit and implicit costs
formula for economic cost
economic cost= accounting profit - implicit cost
you win $200,000 on a scratcher. You start a business. Your accounting profit is $8,000 after one year. If you had invested in stock, you would have made $14000> What is the economic profit
208,000 - 214,000= 6,000
6,000 is the economic cost
marginal product
marginal product is how much more output we get from using one more input
formula for marginal product
marginal product= ā³ Q (quantity) /ā³ L (labor)
If wages cost more than marginal product of labor, then what should happen?
do not hire more workers
fixed cost
fixed cost are costs we still pay even if we produce 0.
Ex. rent, utitlies
variable cost
variable cost are costs only paid when something is produced. Ex. only having to pay workers if they work
total cost
total cost everything the firm spends
formula for total cost
total cost= fixed costs + variable cost
Average fixed cost formula
AFC= Fixed cost/ quantity
AFC= FC/Q
Average variable cost formula
AVC= VC/Q
Average total cost formula
ATC= TC/Q
When marginal revue is greater than marginal cost thanā¦
if MC< MR, need to increase quality to raise profit
When marginal cost equals marginal revenue thenā¦
if MC=MR, changing quality would lower profit
When marginal cost is greater than marginal revue thenā¦
If MC > MR, then reduce quality to raise profit
Note 
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