Watch this video, Revenue, Profits, and Price: Crash Course Economics #24, to help you prepare for this week’s discussion.
Reply to the following prompts by using the company for which you currently work, a business with which you’re familiar, or the dream business you want to start:
- Do you think it’s easy for your selected business to enter this same industry?
- What are some key fixed, variable, implicit, and/or opportunity costs?
Discuss with your peers:
- Read one of your peer’s posts and share another idea for a type of cost.
First, you should explain why you think it is or not, easy for your selected business to enter this same industry
Second you should explain what some key fixed, variable, implicit, and/or opportunity costs are
When addressing the issues raised by this week’s discussion, keep in mind that fixed costs (FC) are costs that do not vary with the quantity produced and variable costs (VC) are costs that vary with the quantity produced. The variable costs change as output increases and represent additional labor and materials required to produce more units. Implicit costs represent the opportunity cost of using resources already owned by the firm. Explicit costs are out-of-pocket costs like payments that are actually made; for example, wages that a firm pays its employees or rent that a firm pays for its office are explicit costs. Often for small businesses, they are resources contributed by the owners; for example, working in the business while not getting a formal salary or using the ground floor of a home as a retail store.
Class: What is the difference between economic profit and accounting profit?