Costs of production Flashcards
What is explicit cost?
require outlay of money (ex: costs of oven, machine, food, …)
What is implicit costs
X don’t require outlay of money (stocks, real estate, bonds, …)
How to calculate total costs?
TC= implicit costs + explicit costs
Accounting profits formula?
Accounting profits = TR - explicit costs
Economic profits formula?
Economic profits = TR - explicit costs - implicit costs
Total profit formula
total profit = TR - TC
what is a normal rates of return in Economic profits
0 (it’s what’s expected)
total costs for the short-run formula
TCsr = TFC + TVC
total costs for the long-run formula
TClg = TVC
What is the name of the concept where the marginal product (MC) or an input declines as the quantity of the input increases?
Diminishing marginal product (/return)
what is Diminishing marginal product (/return)
when the marginal product of an input declines as the quantity of the input increases
Why does Diminishing marginal product (/return) happen?
because factory size is fixed and # employees/labor is variable… too much employees lead to a lost in output
Marginal cost formula ?
MC= △TC / △Q
what does MC looks like in a graph?
check marks
what does ATC looks like in a graph?
smiley face (u-shape)
