micro chapter 7 COP Flashcards
explicit costs
A cost that is actually paid out in money
implicit costs
- A cost that does not require spending money
- Equal to opportunity cost
Accounting costs
Include only explicit costs
economic costs
Include both explicit and implicit costs
Depreciation
Annual cost of any asset that will be used for more than 1 year
Sunk costs
Historical costs are not recoverable
ex. Buildings, machinery, equipment.
Short run production
The period of time in which at least one input in the production process is fixed
Long run
The period of time in which all inputs are variable
Total Product
The total output of a production process
The law of diminishing returns
As more of a variable input is added to a fixed input, the resulting increase in output will, at some point, begin to diminish
Division of labour
Dividing the production process into a series of tasks, each done by a different worker
Law of production
As long as at least one input is fixed, an increase in output eventually means an increase in both marginal and average variable and average total costs
