Reading #15 - Econ - The Firm Flashcards
1
Q
formula for accounting profit
A
TR (tot. revenue) - total accounting (explicit) costs
2
Q
Formula for economic profit
A
accounting profit - implicit opp costs or TRev - total economic costs or TRev - explicit - implicit
3
Q
Define normal profit
A
account profit for which economic profit = 0
4
Q
formula for normal profit
A
accounting profit - economic profit
5
Q
define economic rent to a factor of production
A
difference btween earnings and opp. cost.
6
Q
when is there no economic rent?
A
when supply curve is pefectly elastic
7
Q
when is there the greatest economic rent?
A
perfectly inelastic supply curve
8
Q
what is implicit cost
A
non tangible cash flows (i.e opp cost of firm’s equity)
9
Q
what is explicit cost
A
measureable cash flows for operating expenses
