a) Profit

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8 Terms

1
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  • a firm maximises its profits when…


  • they produce output at the level where MR = MC


2
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  • explicit cost


  • monetary payments for resources


3
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  • implicit cost


  • potential loss of profit after certain decisions are made


4
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  • the formula for total profit


  • TP = TR - TC

    • TC including explicit and implicit costs


5
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  • the formula for marginal profit


  • MP = MR - MC


6
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  • a firm makes a loss when…


  • they produce output at a level where TR < TC


7
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  • a firm makes normal profit when…


  • they produce output at the level where TR = TC


8
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  • a firm makes supernormal profit when…


  • they produce output at the level where TR > TC