UNIT 6 Flashcards
(21 cards)
what is an explicit cost?
payments for inputs from outside the firm
what are implicit costs?
the opportunity costs of inputs owned by the firm
what is the marginal product of labour?
he increase or marginal output from the addition of an input
what is diminishing marginal product?
Diminishing marginal product occurs when adding more of one input (like labor), while keeping other inputs constant (like capital or land), leads to smaller and smaller increases in output.
what is total revenue?
the amount paid by buyers and received by sellers of a good computed as the price of the good times the quantity sold
what is total cost?
the market value of the inputs a firm uses in production
how is a firms profit calculated?
Profit = total revenue - total cost
what is economic profit?
total revenue minus total cost including both explicit and implicit costs
what is accounting profit?
total revenue minus total explicit cost
what is a fixed cost?
costs that do not vary with the quantity of output produced
what are variable costs?
costs that do vary with the quantity of output produced
what is average total cost?
total cost divided by the quantity of output
what is average fixed cost?
the fixed cost divided by the quanitity of output
what is average variable cost?
variable cost divided by the quantity of output
what is marginal cost?
the increase in total cost that arises from an extra unit of production
what is the effecient scale?
the quantity of output that minimizes the average total cost
what is economies of scale?
the property whereby long-run average total cost falls as the quantity of output increases
what is diseconomies of scale?
the property whereby long-run average cost rises as the quantity of output increases
theres an inverse relationship between what?
the marginal product (MP) and the marginal cost (MC)
what is marginal cost?
the change in total cost that comes from a change in output.
what happens when MC equals ATC?
ATC is at its minimum
