Chapter 11- The Firm: Production and Costs Flashcards
Explicit Costs
the opportunity costs of production that require a monetary payment
Implicit Costs
the opportunity costs of production that do not require a monetary payment
profits
the difference between total revenues and total costs
accounting profits
total revenues minus total explicit costs
economic profits
total revenues minus explicit and implicit costs
sunk costs
costs that have been incurred and cannot be recovered
fixed costs
costs that so not vary with the level of output
total fixed costs(TFC)
the sum of the firms fixed costs
variable costs
costs that vary with the level of outputs
total variable cost(TVC)
`the sum of the firms variable costs
total cost(TC)
the sum of the firms total fixed costs and total variable costs
average total cost(ATC)
a per-unit cost of operation; total cost divided by output
average fixed cost(AFC)
a per-unit measure of fixed costs; fixed costs divided by output
average variable cost(AVC)
a per-unit measure of variable costs; variable costs divided by output
marginal cost(MC)
the change in total costs resulting from a one-unit change in output
Profits are defined as_______ minus _____
total revenues, total costs
Explicit costs are input costs that require a _____payment
monetary
Economists generally assume that the ultimate gal of a firm is to _______ profits
zero
Accounting profits equal actual revenues minus actual expenditures of cash (explicit costs), so they do not include _____ costs.
Implicit
Economists consider a zero economic profit a normal profit because it means that the firm is covering both _____ and ______costs-the total opportunity cost of its resources.
explicit, implicit
_____ costs are costs that have already been incurred and cannot be recovered
sunk
the short-run total costs of a business fall into two distinct categories:_____ costs and _____ costs.
fixed, variable
fixed costs are costs that ________ with the level of output.
do not vary
the sum of a firms fixed costs is called it_____.
total fixed costs
Costs that are not fixed are called _____ costs.
variable
The sum of a firms variable costs is called its ____.
total variable cost
the sum of a firms total _____ costs and total _____ costs is called its total cost.
fixed, variable
Average total cost equals ______ divided by the _____ produced.
total cost, output
Average fixed cost equal ____ divided by the ____ produced.
fixed costs, output
_____ equals total variable cost divided by the level of output produced
Average variable cost
marginal costs are the _____ costs associated with the “last” unit of output produced.
change in total cost
The reason for high average total costs when a firm is producing a very small amount of output is the high_____costs.
total
