ECON (COSTS OF PRODUCTION) Flashcards
Formula to get the Profit
Profit = Total revenue – Total cost
require an outlay of money,
e.g., paying wages to workers.
Explicit Costs
do not require a cash outlay,
e.g., the opportunity cost of the owner’s time.
Implicit Costs
Costs: Explicit and Implicit - remember one of the ten principles, what is it?
The cost of something is
what you give up to get it.
Accounting profit formula
total revenue minus total explicit costs
Economic profit
total revenue minus total costs (including
explicit and implicit costs)
what profit is higher? Accounting or Economic
Accounting Profit
shows the relationship
between the quantity of inputs used to produce a
good and the quantity of output of that good.
production function
production function can be represented by a _____, _____, or ____.
table, equation, or
graph.
of any input is the
additional output after hiring one more worker,
holding all other inputs constant.
Marginal product
Marginal Product of labor formulaa
(MPL) = ∆Q/∆L
Why MPL is important?
Rational people think at the margin.
Why MPL Diminishes?
In general, MPL diminishes as L rises
whether the fixed input is land or capital
(equipment, machines, etc.).
The marginal product of an input declines as the
quantity of the input increases (other things equal).
Diminishing marginal product
is the increase in Total Cost from
producing one more unit:
Marginal Cost
