TOPICS
- accounting and economic
profits
- production function: how output changes with
inputs
OUTCOMES
Distinguish between
explicit and implicit costs, and between accounting and
economic profits
Explain why a normal profit is an
economic cost, but an economic profit is not
Why is a zero economic profit OK
for businesses?
What are sunk (fixed) costs and
why are they ignored?
Explain the law of diminishing
(marginal) returns
Differentiate between the short
run and the long run.
Compute and graph marginal product
and average product when given total product
data
Explain the relationship between
total product, marginal product, and average
product
Explain the shape of the total
product, marginal product, and average product graphs
(specialization and teamwork, congestion, and
overcrowded)
Differentiate between production,
productivity, and productive efficiency
Explain what is meant by: the MP
curve is the slope of the TP curve
(Note: All marginal curves are the slopes of their total
curves.)
Assume your GPA is 3.0:
What happens to your
GPA if your you get straight C's (2.0) this semester?
What happens to your GPA if
your you get straight A's (4.0) this semester?
What happens to the AP curve if
the MP is above it?
What happens to the AP curve if the MP is below
it?
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