Profits And Shutdown Points Flashcards
What is the equation for profits
Total profit = TR - TC
What does total costs mean for economists
Explicit costs -> physical costs
Implicit costs -> opportunity costs
What the difference between accountants and economists in terms of how they see costs
- accountants only take into account explicit costs
What is supernormal profits
Supernormal profits are when the economic profit is positive
What are Normal profits
Normal profits is the minimum prices jn order for factors of production to remain in current use
What are subnormal profits
Losses
What is profit maximisation level
Where total revenue is furthest away above from total costs
Mc = me
What is the shutdown point in the short run
Ntk being able to cover variable costs
When can firms stay open jn the short run
If they are making a contribution to fixed costs and covering variable costs
What si the shutdown in LR
Price falls below AC
