Week 4- chapter 7 notes Flashcards Preview

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Flashcards in Week 4- chapter 7 notes Deck (18):
1

Calculate Total Profit=

TR - TC

2

Total Revenue=

Price x Qty

3

Explicit costs-

Out of pocket costs.
Ex: payment to employees.

4

Implicit costs-

Cost associated w/ tradeoff.
Ex: We do something else w/ the money we put into the restaurant.

5

Accounting profit-

Only have explicit cost.

Total revenue - Explicit cost.

6

Economic profit-

Explicit + implicit cost.

Total revenue - Explicit - Implicit cost.

7

Fixed cost-

Cost of fixed resources that don't change w/ amount produced. Unrecoverable. Maximum acceptable loss.
Ex: rent.

8

Variable cost-

Cost for variable resources that DO change as more or less is produced.
Ex: raw materials.

9

Law of Diminishing Marginal Returns-

As numbers of new employee increases, marginal product of an additional employee will go down.

10

Average total cost (ATC)-

(FC + VC)/ Qty.

11

Average variable cost (AVC)-

VC / Qty.

12

Marginal cost-

Additional cost of producing 1 more unit of output.

13

Short run-

Firm’s total cost can be divided into fixed costs. The maximum acceptable loss.

14

Long run-

When all costs are variable.

15

Economy of scale-

Brings down AC as firms becomes bigger.

16

Long run average cost (LRAC) curve-

Based on short-run curve. will be the least expensive average cost curve for any level of output.

17

Constant returns of scale-

Allowing all inputs to expand does not change the average cost of production.

18

Diseconomies of scale-

Qty goes up, AC goes up.