Costs, revenues & profit Flashcards
What is long run?
Period of time in which all factors of production are variable, but the state of technology is fixed
What is marginal production?
Extra output that is produced by using an extra unit of the variable factor
What is average production?
The output that is produced, on average, by each unit of the variable factor
What are marginal returns?
As extra units of a variable factor are added to a quantity of a fixed factor, the output from each additional unit will eventually diminish
What are average returns?
As extra units of a variable factor are added to a given quantity of a fixed factor, the output per unit of the variable factor will eventually diminish
In economic costs, which are factors from others?
Factors nor already owned by the firm (wages, rent, suppliers)
What are explicit costs?
Costs to a firm that involve the direct payment of money
What are implicit costs?
Earnings that a firm could have had if it had employed its factors in another use
How does the Total Fixed Cost (TFC) work?
It is a constant amount
How does the Total Variable Cost (TVC) work?
It increases as the firm uses more of the same factor
How does the Total Cost (TC) work?
Total cost of both factors to produce an output
What is Average Fixed Cost (AFC) and its formula?
Fixed cost per unit of output
TFC / Q
What is Average Variable Cost (AVC) and its formula?
Variable cost per unit
TVC / Q
What is Average Total Cost (ATC) and its formula?
Total cost per unit
TC / Q
What is short run?
Period of time in which at least one factor of production is fixed
