Chapter 8 Flashcards
What’re explicit costs?
explicit costs are direct, purchased, out of pocket costs
What’s accounting profit?
accounting profit equals total revenue minus explicit costs
What’re implicit costs?
indirect, non-purchased, OPPURTUNITY COSTS
What’s economic profit?
economic profit equals Total revenue - explicit costs - implicit costs
What’s the short run?
when the production of one input is fixed and can’t change
What’s the long run?
when the production of all inputs are variable (they can be changed)
What happens to marginal product as successive units of a variable resource are added to a fixed resource?
it DECREASES
What’s marginal product?
the change in total product once one more unit of labor is added
What happens when the marginal product of labor is equal to the average product of labor?
average product of labor is at its PEAK.
What’re total fixed costs?
total fixed costs are those costs that AREN’T AFFECTED when short-run output changes
What’re total variable costs?
total variable costs are those costs that ARE AFFECTED when short-run output changes
How do you calculate the TOTAL COST?
total cost = total variable cost + total fixed cost.
How do you calculate the average fixed cost?
average fixed cost:
total fixed cost
———————
quantity produced
What’s the average variable cost?
quantity produced
What’s the average total cost?
quantity produced
