chapter 6 Flashcards
Short Run
Period of time when some of the firm’s inputs
cannot be changed
Long run
Period of time when all of the firm’s inputs can be changed
The goal to the seller is to
1.How to make the product
2. What is the cost of making the product?
3. How much can the seller get for the product in the market?
Marginal product
is the change in total output associated with using one more unit of input. (Increases with the
first workers, can be negative)
Law of diminishing returns
At some point, each additional worker
contributes less output than the worker
before.
Fixed cost
The cost associated with the fixed factors of production. Fixed costs do not change as output changes.
Variable Cost
The cost associated with the variable factors of production.Variable costs change as the level of output changes
ATC
Average Total Cost/Total cost divided by total output
AVC
Average Variable Cost/Variable cost divided by total output.
AFC
Average Fixed Cost/Fixed cost divided by total output
MC
Marginal cost/ is the change in total cost
associated with producing one more unit of output.
Marginal Revenue
Marginal revenue (MR) = Marginal cost (MC)
MC= MR= P
The profit-maximizing rule for perfect competition
MC= MR
= P
The profit-maximizing rule for perfect competition
P>ATC
economic profits
P<ATC
economic losses
