Chapter 13 Flashcards
(20 cards)
total revenue
the amount a firm receives for the sale of its output
total cost
the market value of the inputs a firm uses in production
profit
total revenue - total costs
cost of production
includes all the opportunity costs of making its output of goods and services
explicit costs
occur and reported in business documents; cost that happens for a purpose
implicit costs
implied costs, economical costs; not really shown or reported as costs; described as opportunity costs or loss of an opportunity
economic profit
total revenue - total cost
accounting profit
total revenue - explicit costs
production function
shows the relationship between quantity of inputs used to make a good and the quantity of output of that good
marginal product
increase in output that arises from an additional unit of that input
diminishing marginal product
the marginal product of an input declines as the quantity of the input increases
total cost curve
relationship between the quantity a firm can produce and its cots determines pricing decisions
fixed costs
costs that do not vary with the quantity of output produced
variable costs
costs that vary with the quantity of output produced
marginal costs
measures the increase in total costs that arises from an extra unit of production
marginal cost formula
(change in total cost) / (change in quantity)
efficient scale
the quantity of output that minimises average total cost
economies of scale
long-run average total cost falls as the quantity of output increases
diseconomies of scale
long-run average total cost rises as the quantity of output increases
constant returns to scale
long-run average total costs stay the same as the quantity of output increases
