What is theory of cost and profit?

Learning ObjectivesExplain the relationship among the differenteconomic costs.Differentiate between economic profitandaccounting profit.Types of Economic CostsExplicit Cost also ca

What is theory of cost and profit?

Learning ObjectivesExplain the relationship among the differenteconomic costs.Differentiate between economic profitandaccounting profit.Types of Economic CostsExplicit Cost also called the expenditure cost.Payments to the owners of the factors ofproduction like wage, interests, raw materialsImplicitCosta firms opportunity cost ofusing its own factors of production without acorresponding cash payment likerent for land.Types of Economic CostsFixed Cost(FC)-does not change with anincrease or decrease in the amount ofgoods or services produced.Variable Cost(VC)-expense that varieswith production output. they rise asproduction increases and fall as productiondecreases.Total Cost (TC) =the market value ofall theinputs used by the firm in production (FC + VC)Types of Economic CostsOpportunity cost -The cost of an alternative thatmust be forgone in order to pursue a certain action.Types of Economic CostsAverage Cost(AC) also called the unit

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