definitions Flashcards
excludable good
if people can be prevented from using a good
rivalry in consumption
If one person’s use of a unit of a good reduces another person’s ability to use it, the good is rival in consumption
private good
both excludable and rival in consumption
public good
neither excludable nor rival in consumption
common resources
rival in consumption but not excludable
club goods
excludable but not rival in consumption
free-rider problem
a person who receives the benefit of a good without paying for it
cost-benefit analysis
a study that compares the costs and benefits to society of providing a public good
Tragedy of Commons
a parable that illustrates why common resources are used more than is desirable from the standpoint of society as a whole; arises because of an externality
total revenue
the amount that the firm receives for the sale of its output
total cost
the amount that the firm pays to buy inputs
profit
total revenue - total cost
explicit costs
input costs that require an outlay of money by the firm
implicit costs
input costs that do not require an outlay of money by the firm
production function
the relationship between the quantity of inputs used to make a good and the quantity of output of that good
diminishing marginal profit
the property whereby the marginal product of an input declines as the quantity of the input increases
fixed costs
costs that do not vary with the quantity of output produced
variable costs
costs that vary with the quantity of output produced
average total cost
total cost divided by the quantity of output
average fixed cost
fixed cost divided by the quantity of output
average variable cost
variable cost divided by the quantity of output
marginal cost
the increase in total cost that arises from an extra unit of production
efficient scale
the quantity of output that minimizes average total cost
constant returns to scale
the property whereby long-run average total cost stays the same as the quantity of output changes
