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Production decisions and economic profit
Economic profit vs. accounting profit. Average total cost (ATC) and marginal cost (MC). Marginal product of labor (MPL). Price discrimination.
All content in “Production decisions and economic profit”

Economic profit and opportunity cost

Economic profit and accounting profit are two different things (the difference being that economic profit takes into account opportunity cost). Confused? This tutorial lays it all out with the example of a restaurant.

Average costs (ATC, MC) and marginal revenue (MR)

In this tutorial, Sal uses the example of an orange juice business to help us understand the ideas of average total cost (ATC), marginal cost (MC) and marginal revenue (MR). We then use this understanding to answer the age-old question, "how much orange juice should I produce?" Finally, we use these ideas to construct a long-run supply curve. A must watch if you're interested in making juice!

Average fixed, variable and marginal costs

Using a spreadsheet, Sal walks through an example of average costs per line of code as a firm hires more engineers. Really good primer to understand what average fixed costs, average variable costs, average total costs (ATC) and average marginal costs (MC) are (and how they are calculated).

Labor and marginal product revenue

Constructing a demand curve for an individual firm by thinking about how much increment benefit they get from an incremental employee (marginal product of labor (MPL) and marginal product revenue (MPR). We later think about how we can add these "demand" curves to construct a "demand" curve for the market for labor in this industry.

Price discrimination

This short tutorial explores how a wine business can utilize first-degree price discrimination to maximize economic profit (it uses many of the ideas we've explored in the rest of this tutorial).