Chapter 4 - The Costs Of Production Flashcards
THE AMOUNT OF OTHER PRODUCTS THAT MUST BE FORGONE OR SACRIFICED TO OBTAIN A UNIT OF ANY PRODUCT
ECONOMIC/OPPORTUNITY COST
MONETARY PAYMENTS A FIRM MAKES TO NON-OWNERS OF THE FIRM WHO ARE SUPPLIERS OF LABOUR, MATERIALS, FUEL, TRANSPORT, SERVICES ETC.
EXPLICIT COSTS
THE MONETARY INCOMES A FIRM SACRIFICES WHEN IT EMPLOYS A RESOURCE IT OWNS TO PRODUCE A PRODUCT RATHER THAN SUPPLYING THE RESOURCE IN THE MARKET
IMPLICIT COSTS
THE MINIMUM COST PAYMENT THAT IS JUST SUFFICIENT TO OBTAIN AND RETAIN CONTRIBUTIONS BY THE ENTREPRENEUR
NORMAL PROFIT
THE TOTAL REVENUE OF A FIRM LESS ALL ITS EXPLICIT COSTS
ACCOUNTING PROFIT
THE TOTAL REVENUE OF A FIRM LESS ALL ITS ECONOMIC COSTS (INC. ENTREPRENEURIAL ABILITY)
ECONOMIC/PURE PROFIT
FACTORS OF PRODUCTION WHOSE QUANTITY CAN BE INCREASED OR DECREASED DURING A PARTICULAR PERIOD
VARIABLE RESOURCES
FACTORS OF PRODUCTION WHOSE QUANTITY CANNOT BE INCREASED OR DECREASED DURING A PARTICULAR PERIOD
FIXED RESOURCES
AS SUCCESSIVE EQUAL INCREMENTS OF ONE RESOURCE ARE ADDED TO A FIXED RESOURCE, BEYOND SOME POINT THE RESULTING INCREASES IN TOTAL OUTPUT WILL DIMINISH IN SIZE
LAW OF DIMINISHING RETURNS
THE TOTAL OUTPUT OF A PARTICULAR GOOD OR SERVICE PRODUCED BY A FIRM (OR GROUP OF FIRMS) AS A RESULT OF COMBINING RESOURCES
TOTAL PRODUCT
THE ADDITIONAL OUTPUT OF A PARTICULAR GOOD OR SERVICE RESULTING FROM THE ADDITION OF AN EXTRA UNIT OF RESOURCE
MARGINAL PRODUCT
THE TOTAL OUTPUT OF A PARTICULAR GOOD OR SERVICE PER UNIT OF A RESOURCE EMPLOYED
AVERAGE PRODUCT
THOSE COSTS THAT IN TOTAL DO VARY WITH CHANGES IN OUTPUT
VARIABLE COSTS
THE SUM OF FIXED AND VARIABLE COSTS AT EACH LEVEL OF OUTPUT
TOTAL COSTS
THOSE COSTS THAT IN TOTAL DO NOT VARY WITH CHANGES IN OUTPUT
FIXED COSTS
