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.

Profit= Total Revenue - Total Costs

Total Revenue – Explicit Cost = Accounting Profit

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

Accounting Vs. Economic Profit

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.

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.

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

Economic Art Mo revenue, less costs, mo profits.

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