Midterm 2 (Production) Flashcards
explicit costs
monetary payment
implicit costs
opportunity costs of owned resources
economic costs =
explicit + implicit costs
accounting profit
total revenue - explicit costs
economic profit
total revenue - economic costs
economists consider all
costs of production
total product (TP) =
total output
marginal product (MP) =
change in TP / change in L
average product (AP) =
TP / L
MP is the ___________ output produced as a result of utilizing ____ more unit(s) of a variable resource.
additional
one
AP is the amount of output produced ____ ______ of a resource employed
per unit
increasing marginal returns
increase in marginal productivity
fixed costs examples
rent, insurance premiums
variable costs examples
more labor, materials
diminishing marginal returns
decrease in marginal productivity
Total cost (TC)
TFC + TVC
“too many cooks in the kitchen”
diminishing marginal returns
AFC + AVC =
ATC
on a graph, _____ always declines with additional output, while _____ and _____ decline then increase
AFC
AVC
ATC
MC =
change in TC / output (Q)
When ATC and AVC meet MC, that is their _________ point
lowest
An average value ________ when a marginal value rises above it, and ________ when it falls below it.
increases
decreases
each ATC (small curve) on an LRATC graph represents what?
a different level of output
economies of scale
left/green, decreasing avg. total cost, increasing output
constant returns to scale
middle/yellow, stable avg. total cost, increasing output
diseconomies of scale
right/red increasing avg. total cost, increasing output
