Chapter 13 - The Cost Of Production Flashcards
(18 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 Cost = Profit
Explicit Costs
Input costs that require an outlay of money from the firm.
Implicit Costs
Input costs that do not require an outlay of money from the firm.
Economic Profit
Total Revenue - Total Cost (Including both Explicit and Implicit Costs = Economic Profit
Accounting Profit
Total Revenue - Total Explicit Cost = Accounting Profit
Production Function
The relationship between quantity of outputs used to make a good and the quantity of output of that good.
Marginal Product
The increase in output that arises from an additional unit of output.
Diminishing Marginal Products
The property whereby the marginal product of an input that declines as the quantity of the input increases.
Fixed Costs
Costs that do not vary with the quantity of output produced.
Variable Costs
Costs that do vary with the quantity of output produced.
Average Total Cost
Total Cost / Quantity of Output = Average Total Cost
Average Fixed Cost
Fixed Cost / Quantity of Output = Average Fixed Cost
Average Variable Cost
Variable Cost / Quantity of Output = Average Variable Cost
Marginal Cost
The increase in total cost that arises from an additional unit of output.
Efficient Scale
The quantity of output that minimizes average total cost.
Economies of Scale
The property whereby long-run average cost falls as the quantity of output increases.
