Test 3 Flashcards
SR
- Factory size
- labor, raw material variable input
LR
everything is variable
total product
the total output of a good produced by the firm
TP=
Total output =quantity
diminishing marginal product
as labor increases, a point will be recurred where additions to output will eventually decline
fixed costs are unavoidable in the __
short run
average total cost
per unit cost of production
ATC=TC/Q
average fixed cost
per unit fixed cost
ATC=FC/Q
average variable cost
per unit variable cost
ATC=VC/Q
Marginal Cost
the increase in total cost resulting from one unit increase in output
Cost in the SR
Labor, raw materials- variable costs
Rent, fire insurance-fixed costs
When q=0, then VC=
$10
q increases then VC increases and
FC stay the same
q decreases then VC decreases and
FC stays the same
TC=
vc + fixed cost
TC=VC+FC when q =0 ….
TC= $0 +FC, tc=FC
profit=
total revenue - total cost
this is sometimes called economic profit
Total cost =
explicit costs+implicit costs
profit = TR-( _____)
explicit + implicit
explicit costs
the opportunity costs of production that require a monetary payment.
ex: paying workers ages, rent , raw materials
- anything where money changes hands
implicit costs
the opportunity costs of production that do not require a monetary payment
ex: forgone salary, rent, and interest
accounting profit=
TR-EXPLICIT COSTS
what is a bigger profit
accounting profit , bc economic is subtracting explicit costs
whole sale and wages are
explicit costs
salary and rental are
implicit costs
if the economic profit is greater than zero, they should
stay in business
if the economic profit is less than zero, they should
leave business
if the economic profit equals zero, they should
stay or leave
when you have a normal profit,
what you are currently doing is just as good as your next best.
short run
a time period too brief to vary some inputs
long run
a time period over which all production inputs are variable
