econ test 3 Flashcards
(44 cards)
total cost
fixed cost+variable cost
explicit cost
cost that involves spending money
implicit cost
non monetary cost opportunity
economic costs
explicit+implicit costs
average total cost
total variable cost + fixed cost/output (or average fixed cost+ average variable cost)
shape of average total cost curve
U
total cost shape curve
check mark
law of diminishing turns applies in
short run
marginal product of labor is decreasing but still positive
total output is increasing at decreasing rate
average product of labor
change in input/change in number of workers
marginal product of labor > average product of labor
average product of labor is increasing
what type of costs in the long run
no fixed cost, only variable
economies of scale
firms long run average costs fall as it increases the quantity of output it produces
constant returns to scale
firms long run average cost remains unchanged as it increases output
diseconomies of scale
firms long run average cost rise as firm increases output
total revenue>total cost
= profit
price<average variable cost
firm should shut down
behavioral economics
when consumers and firms don’t appear to be making rational decisions
endowment effect
strong attachment to what they own
demand curve upward sloping
inferior good with income effect larger than substitution effect
AVC (average variable cost)
variable cost/output or TVC/MPL
accounting profit
Total revenue-explicit costs (include interests to people)
economic profit
total revenue - (explicit and implicit costs- savings etc)
opportunity cost here in numerical problems is for
value of best alternative
