Production, Costs & Profit I

Flashcards summarizing key concepts on production, costs, and profits from the lecture notes.

What are the three main sectors in the economy?

The primary sector, the secondary sector, and the service sector.

What does the primary sector consist of?

Industries that extract or cultivate natural resources.

What is the secondary sector focused on?

Industries that fabricate or process goods.

What industries make up the service sector?

Trade and information industries.

What is a labour-intensive process?

A production process that employs more labour and less capital.

What defines a capital-intensive process?

A production process that employs more capital and less labour.

What provides productive efficiency in production processes?

The lowest-cost process.

What are explicit costs?

Payments to resource suppliers outside a business.

What are implicit costs?

Opportunity costs; what owners give up by being involved in a business.

How is economic profit calculated?

By subtracting economic costs (explicit and implicit) from total revenue.

How does accounting profit differ from economic profit?

Accounting profit is total revenue minus explicit costs and generally exceeds economic profit because it does not consider implicit costs.