Ch 8: Business Costs and Production Flashcards
accounting profit
total revenue minus explicit costs p248
average fixed cost (AFC)
dividing total fixed cost by the output p257
average variable cost (AVC)
is determined by dividing total variable cost by the output P257
constant returns to scale
occur when long run average total costs remain constant as output expands. Double input= Double output P263
diminishing marginal product
occurs when successive increases in inputs are associated with a slower rise in output p254
diseconomies of scale
occur when long run average total costs rise as output expands. Double input < double output p262
economic profit
is calculated by subtracting both the explicit costs and the implicit costs of business from total revenue p248
economies of scale
occur when long run average total costs decline as output expands. Double input > double output p262
efficient scale
is the output level that minimizes average total cost in the long run p262
explicit costs
are tangible out of pocket expenses p247
factors of production
are the inputs (Labor, Land and Capital) used in producing goods and services p256
fixed costs
are unavoidable; they do not vary with output in the short run. Fixed costs are also known as overhead p256
implicit costs
the costs of resources already owned, for which no out of pocket payment is made. Opportunity costs of resources already owned p247
loss
results when total revenue is less than total cost p246
marginal cost (MC)
is the increase in cost that occurs from producing one additional unit of output p259
