3. Revenues,costs & Profits Flashcards
Types of revenue
-total revenue
-average revenue
-marginal revenue
What is total revenue
The total amount of money coming in
What is average revenue
Total revenue/output
What is marginal revenue
The extra revenue that the firm earns from selling one more unit of production.
Change in total revenue/change in output
Types of cost
-total cost
-total fixed cost
-total variable cost
-average total cost
-average fixed cost
-average variable cost
-marginal cost
What is total cost
The cost of producing a given level of output (variable+fixed)
What is total fixed cost
Costs that do not change with output and remain constant (rent, machinery)
What is total variable cost
Cost that change directly with output (materials)
What are the averages of costs
The definition divided by output
What is marginal cost
The extra cost of producing one extra unit of a good
When do variable costs occur
In both the long run and short run
When do fixed costs occur
Only in the short run, as fixed costs become variable in the long run
What is diminishing marginal productivity
In the short run, adding labour makes a firm more productive, but has less of an impact every-time one more is added due to a lack of room
