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Chapter 10: Organizing production (only 10.1) ((A. Producer theory:,…
Chapter 10: Organizing production (only 10.1)
A. Producer theory:
Discussing phone companies; Mobilicity, Wind and T-Mobile to discuss how some companies original goal is not to maximize profits at first but rather attract as many customers as they can or establish their firm
He mentions T & T Asian supermarket who recently sold their company to Loblaws; initial investment minus the amount they made when sold
Types of profit
Profit = TR (total revenue) - cost
Accounting profit = TR - accounting cost
Accounting cost bought in the market
Economic profit = TR - opportunity cost
Opportunity cost (input cost) owned by the firm; supplied by the owner
Depreciation
Foregone interest
Foregone wage
Normal profit; other industries can yield
Opportunity cost > accounting cost
Economic profit < accounting profit
Firm’s Constraint
Technology constraints
Information constraints
Market constraints
Recap from last lecture
Economic profit= Total Revenue – economic cost
Opportunity cost is the cost of resources bout in the market+ the cost of resources owned and supplied by the firm’s owner.