Chapter 13 - The Costs of Production Flashcards
Total Revenue
The amount a firm receives for the sale of its output.
Total Cost
The market value of the inputs a firm uses in production.
Profit = ?
(Total Revenue) - (Total Cost)
Explicit Costs
Input costs that require an outlay of money by the firm.
Implicit Costs
Input costs that do not require an outlay of money by the firm (opportunity costs).
Economic Profit
(Total Revenue) - (Explicit Costs + Implicit Costs)
Accounting Profit
(Total Revenue) - (Total explicit costs)
Production Function
The relationship between quantity of inputs used to make a good & the quantity of output of that good.
Marginal Product
The increase in output that arises from an additional unit of input
Diminishing marginal product
The property whereby the marginal product of an input declines as the quantity of the input increases.
Fixed Costs
Costs that do not vary with the quantity of output produced.
Variable Costs
Costs that vary with the quantity of output produced.
Total Cost = ?
(Fixed Costs) + (Variable Costs)
Average Total Cost
(Total Cost) / (Quantity of output)
Average Fixed Cost
(Fixed Cost) / (Quantity of output)
Average Variable Cost
(Variable Cost) / (Quantity of output)
Marginal Cost
The increase in total cost that arises from an extra unit of production.
Marginal Cost = ?
(Chang in Total Cost) / (Change in Quantity of output)
Marginal Cost graph rises as quantity of output increases because of _________?
Diminishing marginal product.
The bottom of the U-Shaped ATC curve occurs at the quantity that ______ ATC.
Maximizes
Efficient Scale
The quantity of output that maximizes the ATC
Whenever marginal cost is ______ than ATC, ATC is falling. When marginal cost is ______ than ATC, ATC is rising.
Less, greater
Economies of Scale
The property whereby long-run ATC falls as quantity of output increases
Diseconomies of Scale
The property whereby long-run ATC rises as quantity of output increases.
Constant Returns of Scale
The property whereby long-run ATC stats the same as the quantity of output changes.
