Chapter 9 Flashcards
(26 cards)
accounting profit
revenue - explicit cost
average fixed cost
total fixed cost per unit of output
average product
average product of a factor of production; total product / quantity of the factor employed
average total cost
total cost per unit of output
average variable cost
total variable cost per unit of output
constant returns to scale
features of firm that lead to constant long-run average cost as output increases; the LRAC curve is horizontal
diminishing marginal returns
tendency for marginal product of factor to be less than the MP of previous unit of factor
diseconomies of scale
features of firm that make ATC rise as output increases–the LRAC curve slopes upward
economic profit
revenue - economic cost
economics of scale
features of firm that make ATC fall as output increases–the LRAC curve slopes downward
law of diminishing returns
as a firm uses more of a variable factor of production with a given quantity of the fixed factor of production, the marginal product of the variable factor of production eventually diminishes
long run
the time frame in which the quantities of all factors of production can be varied
long-run average cost curve
the relationship between the lowest attainable average total cost and output when the firm can change both the plant it uses and the quantity of labor it employs
marginal cost
the opportunity cost of producing one more unit of a good or service; the best alternative forgone; calculated as the increase in total cost divided by the increased in output
marginal product
the increase in total product that results from a one-unit increase in the variable input, with all other inputs remaining the same; calculated as the increase in total product divided by the increase in the variable input employed, when the quantities of all other inputs remains the same
minimum efficient scale
the smallest quantity of output at which the long-run average cost reaches its lowest level
normal profit
receiving no more and no less than if the firm moved its resources to the best alternative uses
short run
time frame where quantity of one factor is fixed and the quantities of the other factors can be varied
sunk cost
the past expenditure on a plant that has no resale value
total cost
the cost of all the productive resources that a firm uses
total fixed cost
the cost of the firm’s fixed inputs
total product
the maximum output that a given quantity of labor can produce
total variable cost
the cost of all the firm’s variable inputs
marginal product of labor
change in output form an additional unit of labor
