Econ 201 Lecture 9 Notes
Econ 201 Lecture 9 Notes ECON 201
Popular in Micro Economics
Popular in Microeconomics
This 4 page Class Notes was uploaded by Samantha Shea on Monday October 3, 2016. The Class Notes belongs to ECON 201 at Michigan State University taught by Professor Liedholm in Fall 2016. Since its upload, it has received 3 views. For similar materials see Micro Economics in Microeconomics at Michigan State University.
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Date Created: 10/03/16
Lecture 9 Monday, October 3, 212:38 PM • Midterm Exam-‐ October 5th • Location A-‐O: 107 South Kedzie P-‐Z: 101 Biochemistry • Review Session -‐ October 3rd 105 S. Kedzie • Exam Tips: ○ Review 1,2,4,5, and 6 ○ Class Notes/ Powerpoints ○ Practice § Review Quizzes § Practice Midterm § Problem Set #1 Problem Set #1 1. Understand PPF: opportunity cost 2. Spartan Lemon Lime and Sprite are substitute goods. An increase in the price of Spartan Lemon Lime will: Shift the demand curve of Sprite to the right 3. An increase in supply: shifts supply curve to right Price is lower Increase in quantity demanded 4. 0.3 is inelastic Price decreases Total revenue decreases Last Time • Taxation ○ Statutory Burden ○ Economic Burden • Elasticity of Supply • Descriptive Profile of Firms Topic for this Section • Business Firm -‐ Chapter 13 1. Objective 2. Economic vs. Accounting Profit 3. Production Function • Circular Flow • Business Firm -‐ Chapter 13 1. Objective 2. Economic vs. Accounting Profit 3. Production Function • Circular Flow • Firm ○ An economic institution that transforms inputs (resources) into goods and services ○ Inside the firm operates like a command economy • Objective of a firm ○ Profits? ○ Total revenue -‐ total costs = Profit ○ Maximum profits § How? ○ Maximize Greed? ○ Other objectives • Wall Street ○ Movie starring Michael Douglas as a corporate raider ○ Attempting to take over Teldar Paper Company ○ A corporation with owners (stockholders) and managers separated • Economic Versus Accounting Profit ○ Other objectives • Wall Street ○ Movie starring Michael Douglas as a corporate raider ○ Attempting to take over Teldar Paper Company ○ A corporation with owners (stockholders) and managers separated • Economic Versus Accounting Profit Due to differences in how costs are treated ○ ○ Opportunity cost-‐whatever must be given up § Also, explicit costs+ implicit costs □ Explicit costs: input (resource) costs that require an outlay of money □ Implicit costs: input (resource) costs that do not require an outlay of money ® "hidden costs" ® Typically for -‐owned resources • Measured as opportunity cost ○ Labor § Best alternative employment ○ Financial costs § Interest payments • Lawn Mowing Company Accounting Economic Profit Profit Revenue $200,000 $200,000 Explicit Costs -‐$170,000-‐$170,000 Implicit Costs -‐$40,000 Profit $30,000 -‐$10,000 • Attending MSU/Year Tuition 15,000 Housing $10,000 Other $3,000 Private $28,000 Public $22,000 Total Explicit $50,000 Implicit $30,000 Total Opportunity cost $80,000 • Production Production function: the term economists use to describe the technology Total Explicit $50,000 Implicit $30,000 Total Opportunity cost $80,000 • Production ○ Production function: the term economists use to describe the technology of production ○ Portrays the relationship between the quantity of inputs (resources) and the output of a good or service ○ Production functions apply to firms • Inputs: Anything used in the production process ○ ○ Two general types ○ Fixed-‐ cannot be changed during the production period (time) ○ Variable-‐ can be changed during the production period (time)
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