Defining Profit

Costs

• Explicit Costs » monetary cost, paying money

• Implicit costs » value of benefits ignored(opportunity costs)

Profit

• Profit(π) » TR(total revenue) - TC(Total Costs)

• Accounting Profit » TR - (explicit costs + depreciation)

  • Depreciation » natural loss in value of something overtime

• Economic profit » TR - (explicit costs + implicit costs)

  • Normal profit » when econ profit = 0, meaning firm can’t do any better with its resources, so it continues w current situation