Chapter 13 - The Cost of Production Flashcards
(44 cards)
What does economists normally assume?
That the goal of a firm is to maximize profits
What is the formula to find profit?
Total revenue - total cost
What is the formula to find total revenue?
Quantity x price
What is the amount a firm receives for the sale of its output?
Total revenue
What is the market value of the inputs a firm uses in production?
Total cost
What refers to all the things that must be forgone to acquire that item?
Opportunity costs
What includes all the opportunity costs of making its output of goods and services?
The cost of production
What are input costs that require an outlay of money by the firm
Explicit costs
What are input costs that do not require an outlay of money by the firm?
Implicit costs
What is the formula to find total costs?
Explicit costs + implicit costs
When measuring a firm’s costs who includes both explicit and implicit costs?
Economists
When measuring a firm’s costs who includes explicit costs, but not implicit costs?
Accountants
What is the formula to find an economist’s profit?
Total revenue - total costs
True or False:
In an economists profit total cost includes explicit and implicit costs
True
Is the accounting profit or the economics profit usually larger?
The accounting profit is usually larger
True or False:
A firm making positive economic profit will stay in business
True
What is the relationship between the quantity of inputs and the quantity of outputs called?
Production function
What is the slope of the production function?
Marginal product
When the number of workers goes from 1 to 2, cookie production increases from 50 to 90, so what is the marginal product of the second worker?
40 cookies
True or False:
Production function gets flatter as more inputs are being used
True
What is the relationship between quantity produced and total costs called?
The total cost curve
What are the costs that do not vary with the quantity of output produced?
Fixed Costs
What is fixed cost equal to?
The total cost when output = 0
What are the costs that vary with the quantity of output produced?
Variable Costs
