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Types of Profit

Types of Profit. AP Microeconomics Block 2B – Ryan Higgins. Implicit and Explicit Costs. Implicit Costs are not involved in an outlay of money, they are measured by the benefits that you could’ve had in terms of dollars. Explicit Costs are costs that actually require an outlay of money.

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Types of Profit

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  1. Types of Profit AP Microeconomics Block 2B – Ryan Higgins

  2. Implicit and Explicit Costs • Implicit Costs are not involved in an outlay of money, they are measured by the benefits that you could’ve had in terms of dollars. • Explicit Costs are costs that actually require an outlay of money.

  3. Profit= Total Revenue - Total Costs

  4. Total Revenue – Explicit Cost = Accounting Profit

  5. Total Revenue – Opportunity Cost (Explicit and Implicit Costs) = Economic Profit

  6. Accounting Vs. Economic Profit

  7. Normal Profit • When a firm is making an economic profit of zero, it is making a Normal Profit • A firm making a normal profit is making just enough money to keep it using its resources in its current activity.

  8. Relationship to other topics… • Profits have to do with everything involved with business. If I could relate my topic to one specific other, it would be the profit maximizing point, MR=MC • When a firm is functioning at a point where their Marginal Revenue Curve is intersecting their Marginal Cost Curve, they are in a good position to maximize their profits.

  9. Profits can also relate to “Costs.” • Implicit and Explicit costs have everything to do with profits • The more costs that a firm has, the more total revenue they need to make to keep their business going

  10. Economic Art Mo revenue, less costs, mo profits.

  11. Real World Links • http://online.wsj.com/article/SB10001424052970204555904577168594213889980.html • http://online.wsj.com/article/BT-CO-20120118-716012.html

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