d4 Flashcards
firms are willing to produce and sell a greater
quantity of a good when the price of the good is high
Law of Supply
price multiplied to the quantity of the outputs. The amount they
received from the sale.
Total Revenue
– market value of the inputs a firm uses in production.
Total Costs
total revenue less total cost
Profit
– cost that needs to be given up or forgone to acquire that
good or item.
Opportunity Cost
input costs that require a direct outlay of money
Explicit Cost
do not require outlay of money
Implicit Cost
total revenue less cost including explicit and implicit
Economic Profit
– total revenue less explicit costs
Accounting Profit
– relationship of inputs and outputs of the goods.
Production Function
increase in output that arises from an additional unit of that
input.
Marginal Product
input declines as the quantity of input
increases.
Diminishing Marginal Product
cost of each typical unit of product. It can be determined
by dividing the firm’s costs by the quantity of output it produces.
Average Cost
– increases in total costs that arises from extra unit of
production. It answers the question: “How much does it cost to produce an
additional unit?
Marginal Cost
the bottom of the U-shaped ATC curve
occurs at the quantity that minimizes average total cost.
Efficient Scale of the Firm
refer to the party whereby long-run ATC falls as the
quantity of the output increases.
Economies of Scale
– long-run ATC rises as the quantity of output
increases.
Diseconomies of Scale
– long-run ATC stays the same as the quantity of
output increases.
Constant Return to Scale
