Chapter 8 Flashcards
Accounting Profit
Total revenue minus accounting costs
Demand Curve facing the firm
A curve that indicates, for different prices, the quantity of output that customers will purchase from a particular firm
Economic Profit
Total revenue minus all costs of production, explicit and implicit
Exit
A permanent cessation of production when a firm leaves an industry
Loss
The difference between total cost (TC) and total revenue (TR), when TC>TR
Marginal approach to profit
A firm maximizes its profit by taking any action that adds more to its revenue than to its cost
Marginal Revenue
The change in total revenue from producing one more unit of output
Shutdown rule
In the short run, the firm should continue to produce if total revenue exceeds total variable costs; otherwise, it should shut down
Total revenue
The total inflow of receipts from selling a given amount of output
