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Chapter 7
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Accounting profit
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the difference between a firms total revenue and its explicit costs
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clarisssah
Terms in this set (46)
Accounting profit
the difference between a firms total revenue and its explicit costs
allocative function of price
changes in prices direct resources away from overcrowded markets+toward markets that are underserved
barner to entry
any force that prevents firms from entering a new market
economic loss
an economic profit that is less than zero
economic profit
excess profit- the difference between a firms total revenue and the sum of its implicit and explicit costs
economic rent
that part of the payment for a factor of production that exceeds the owners reservation price the price below which the owner would not supply the factor
efficient (pareto efficient)
a situation is efficient if no change is possible that will help some people without harming others
explicit costs
the actual payments a firm makes to its factors of production + other suppliers
implicit costs
the opportunity costs of the resources supplied by the firms owners
invisible hand theory: adam smiths theory
the actions of independent self interested buyers + sellers will often result in the most efficient allocation of resources
