UNC-Chapel Hill ECON 101 - 9. September 16 (2 pages)

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9. September 16



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9. September 16

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Pages:
2
School:
University of North Carolina at Chapel Hill
Course:
Econ 101 - Introduction to Economics

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Washburn September 16 2014 Econ 101 Turchi Value o Goals of a firm are to maximize profit o Profit is total revenue minus total opportunity cost o TOC o Direct explicit o Implicit o The cost of money o Depreciation o The loss in market value generally due to use wear and tear of capital equipment o New car 3000 o 100 000 Buy new machine o Only one product o Cannot move machine New Car Actual o Negligible scrap value o 10 000 per year depreciation Even depreciation o 29 000 Revenue per year o 35 000 Total Cost o Profit 6000 per year o Since the machine has no resale value opportunity cost Time 6 years is 0 so actual profit is 4000 when depreciation is set equal to 0 o Risk Taking o Lender takes on the risk that the borrower will not be able to pay it back o Cover the risk with interest o Co sign a loan o Charge riskier borrowers a higher rate o Special Advantage o Brand Name o A Name o Owner s Time o Total Payments o 30 000 o Total Revenue o 36 000 o Profit Total Revenue direct cost imputed costs o Accounting profit TR TDC o Total Direct Cost TDC o Economic Profit TR TDC TIC o Total Imputed Cost TIC Washburn o 3 time frames o Short Run o At least one fixed input o Long Run o All inputs are variable given known technology o Very Long Run o The technology is not even known yet



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