Ch 13 terms Flashcards
define theory of the firm
firms goal is to max profit
define industrial organization
how firms choices for P and Q depend on market conditions
define explicit costs
$ spent by firm on materials, equipment, rent, etc
define implicit cost
no cash - opportunity cost for time and money elsewhere
define economic profit
total revenue minus exp and imp costs
define accounting profit
total revenue - explicit costs
which is bigger: econ profit or accounting profit
accounting profit
doesn’t include implicit costs
what is a production function
graph representing diminishing returns on Q of input vs Q of output
define fixed factor
part of production process unaffected by production changes
define variable factor
part of production affected by production changes.
define fixed cost
costs not changed by Q of output (rent)
define variable cost
costs affected by Q of output (wages)
what is ATC
average total cost
consists of avg fixed and avg variable cost
ATC formula
total costs/#Q produced
average fixed cost formula
fixed cost: # output
