Define the following
1. Costs in economics are those things that must be given up in order to have something else. 2. Revenues are the income earned from a firm’s sale of its good or service to consumers in the product market. 3. Profit is the difference between a firm’s total revenues and its total costs. 4. Explicit costs are the monetary payments that firms make to the owners of land, labor, and capital in the resource market. (i.e. rent, wages and interest respectively) 5. Implicit costs refer to the opportunity costs faced by the entrepreneur who undertakes a business venture and who could otherwise have earned money by hiring his self-owned resources out to another employer. 6. The difference between explicit & implicit costs
Wages, interest, rent are explicit costs whereas the perceived value of the entrepreneurial talent is implicit cost. 7. Marginal revenue is the amount by which total revenue (TR) changes with each additional unit of output sold. 8. Average revenue is the revenue per unit of output.
9. Total costs represent the wages of the workers and the costs for capital and land (equals to total fixed cost plus total variable cost). 10. Total variable costs represent the wages paid to the firm’s workers. 11. Fixed costs represent the interest the firm pays for the use of its capital and the rent it pays for the use of the factory space. 12. Average fixed costs represent cost of capital and land per hour (equals to total variable cost divides by total output per hour). 13. Total Revenue is equal to the price times the quantity of output sold. 14. (Average revenue)=8
15. (Marginal revenue)=7
16. Breakeven point is at MC=MR, which means the total revenues are equal to the total costs and the firm is earning a normal profit. 17. Perfect competition and its characteristics
A market is perfectly competitive if there are a large number of firms producing identical...