Chapter 13 Flashcards

1
Q

Total revenue (firm)

A

The amount of money a firm receives after selling their outputs

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2
Q

Total cost

A

The value of the inputs used in production

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3
Q

Profit

A

Revenue - cost

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4
Q

Explicit costs

A

Input costs that require money and directly impact profitability. ex: wages, materials

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5
Q

Implicit costs

A

Input costs that do not require money; opportunity cost. ex: opportunity cost of working somewhere else

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6
Q

Economic profit

A

Total revenue - total costs (explicit and implicit costs)

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7
Q

Accounting profit

A

Total revenue - total explicit cost

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8
Q

Production function

A

Relationship between quantity of inputs and quantity of outputs used to make a good (graph)

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9
Q

Marginal product

A

The increase in output with one additional unit of input

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10
Q

Diminishing marginal product

A

When the marginal product is decreasing (rate of increase is negative)

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11
Q

Average total cost

A

Total cost / quantity of output

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12
Q

Average fixed cost

A

Fixed cost / quantity of output

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13
Q

Average variable cost

A

Variable cost / quantity of output

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14
Q

Marginal cost

A

The increase in cost from one additional unit of production

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15
Q

Efficient scale

A

Output quantity that minimizes total average cost

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16
Q

Economies of scale

A
  • If outputs increase as long-run average cost declines
  • Doubling input more than doubles the output
  • Production becomes more efficient as number of goods produced increases
17
Q

Diseconomies of scale

A
  • If output increases as long-run average cost increases

- Doubling input less than doubles output

18
Q

Constant returns to scale

A
  • As output changes, long-run average costs stay the same

- Doubling input exactly doubles output