12.3 million (11.0%)

617,089 (10.8%)

8.3 million (7.4%)

475,125 (8.3%)

18.6 million (16.6%)

100–499

81,773 (1.4%)

15.9 million (14.2%)

500 or more

17,236 (0.30%)

50.9 million (49.8%)

TABLE 7.1 Range in Size of U.S. Firms (Source: U.S. Census, 2010 www.census.gov)

7.1 Explicit and Implicit Costs, and Accounting and Economic Profit

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain the difference between explicit costs and implicit costs

• Understand the relationship between cost and revenue

Each business, regardless of size or complexity, tries to earn a profit:

Total revenue is the income the firm generates from selling its products. We calculate it by multiplying the

price of the product times the quantity of output sold:

We will see in the following chapters that revenue is a function of the demand for the firm’s products.
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