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Accounting costs and economic costs differ because
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Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.
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A firm that makes zero economic profits
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Covers all its costs, including a provision for normal profit.
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A competitive firm
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is a price taker
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Competitive firms cannot individually affect market price because
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their individual production is insignificant relative to the production of the industry
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The demand curve confronting a competitive firm is
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Horizontal, while market demand is downward-sloping.
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When the short-run marginal cost curve is upward-sloping,
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diminishing returns occurs with greater output.
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For perfectly competitive firms, price
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Is equal to marginal revenue.
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The marginal cost curve
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is the short-run supply curve for a competitive firm at prices above the AVC curve
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the cost of utilities, taxes, and rent are all what
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explicit costs
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Perfect competition is a situation in which
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There are many firms and no buyer or seller has market power.
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Short-run profits are maximized at the rate of output where the
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marginal revenue is equal to the marginal cost
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The demand curve confronting a competitive firm
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Equals the marginal revenue curve.
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Implicit costs are...
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the value of resources used for which no direct payment is made.
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The market price for any good or service sold in a perfectly competitive market is determined by
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supply and demand
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A perfectly competitive firm should shut down at any price below
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the AVC
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If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm
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can increase its profit by decreasing output.
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In defining economic costs, economists emphasize
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Explicit and implicit costs while accountants recognize only explicit costs.
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When the price exceeds the average variable cost but not the average total cost, the firm should, in the short run,
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produce at the rate of output where MR = MC
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If diminishing returns exist, then
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Each unit produced will cost incrementally more to produce
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