TAILIEUCHUNG - Lecture Principles of economics (Asia Global Edition) - Chapter 7

Chapter 7 - Efficiency, exchange, and the invisible hand in action. In chapter 6 our focus will shift to the seller’s side of the market, where our task will be to see why upward-sloping supply curves are a consequence of production decisions taken by firms whose goal is to maximize profit. | Efficiency, Exchange, and the Invisible Hand in Action Chapter 7 McGraw-Hill/Irwin Copyright © 2015 by McGraw-Hill Education (Asia). All rights reserved. 1 Learning Objectives Define and explain the differences between accounting profit, economic profit, and normal profit Explain the Invisible Hand Theory and show how economic profit and economic loss affect the allocation of resources across industries Explain why economic profit, unlike economic rent, tends toward zero in the long run Identify whether the market equilibrium is socially efficient, and explain why no opportunities for gain remain open for individuals when a market is in equilibrium Calculate total economic surplus and explain how it is affected by policies that prevent the market from reaching equilibrium 2 Markets Are Dynamic Every time you see one of these signs, you see the market dynamics at work: Store for Lease Going Out of Business Sale Everything Must Go Now Open Close-Out Model Under New Management 3 The Invisible Hand Individuals act in their own interests Aggregate outcome is collective well-being Profit motive Produces highly valued goods and services Allocates resources to their highest value use LeBron James does not receive training as a baseball player 4 Accounting Profit Most common profit idea Accounting profit = total revenue – explicit costs Explicit costs are payments firms make to purchase Resources (labor, land, etc.) and Products from other firms Easy to compute Easy to compare across firms 5 Economic Profit Economic profit is the difference between a firm's total revenue and the sum of its explicit and implicit costs Also called excess profits Implicit costs are the opportunity costs of the resources supplied by the firm's owners Normal profit is the difference between accounting profit and economic profit Normal profits keep the resources in their current use 6 Three Kinds of Profit Total Revenue Explicit Costs Accounting Profit Normal Profit Economic Profit Explicit Costs

• Kinh tế học
• Principles of economics
• Lecture Principles of economics
• Market imperfections
• The international economy
• Accounting profit
• Economic profit
• Ten principles of economics
• People face tradeoffs
• Opportunity cost
• Marginal changes
• Economics of information
• Consumer choice
• Free rider problem
• Market transactions
• Welfare Economics
• Consumer surplus
• Demand curve
• Efficiency of markets
• Nature of an externality
• Market inefficiency
• Negative externalities
• Principles of microeconomics
• Lecture Principles of microeconomics
• Scarce resources
• Scarcity implies choice
• Choice implies cost
• Principles of agricultural economics
• Agricultural economics
• Economics of agricultural production
• Theory of consumer behaviour
• Economics of market demand
• Dynamics in demand analysis
• Analysis of agricultural markets
• Agricultural markets
• Economics of trade
• Costs of taxation
• Deadweight loss
• Laffer curve
• Supply side economics
• Market forces
• Supply and demand
• Market economies
• Competitive Markets
• Thinking like an economist
• Economic models
• Circular flow diagram
• Production possibilities frontier
• The gains from trade
• Production possibilities
• Comparative advantage
• Absolute advantage
• Costs of production
• Total revenue
• Total cost
• Opportunity costs
• Price elasticity of demand
• Price elasticity
• Midpoint method
• Demand curves
• Factors of production
• Demand for labor
• Production function
• Marginal product of labor
• Controls on prices
• Price ceiling
• Price floor
• Market outcomes
• Theory of consumer choice
• Budget constraint
• Indifference curve
• Marginal rate of substitution
• Measuring nation’s income
• Economy’s income
• Gross domestic product
• Components of GDP
• International trade
• Determinants of trade
• Equilibrium without trade
• Production and growth
• Economic growth
• Monetary system
• Functions of money
• Federal reserve
• Central bank
• Open economy macroeconomics
• Economy macroeconomics
• Closed economy
• Open economy
• Public goods
• Common resource
• Types of goods
• Cost benefit analysis
• Aggregate demand
• Aggregate supply
• Short run economic fluctuations
• Economic fluctuations
• Tax system
• Federal Government
• Marginal tax rate
• Budget surplus
• Macroeconomic policy
• Debate over macroeconomic policy
• Stabilize the economy
• Monetary policy