Midterm 2 Vocab Flashcards
Total revenue
The amount a firm receives for the sale of its output
Total cost
The market value of the inputs a firm uses in production
Profit
Total revenue minus total cost
Explicit costs
Input costs that require an outlay of money by the firm
Implicit costs
Input costs that don’t require an outlay of money by the firm
Economic profit
Total revenue minus total cost, including both explicit and implicit costs
Accounting profit
Total revenue minus total explicit cost
Production function
The relationship between quantity of inputs used to make a good and the quantity of output of that good
Marginal product
The increase in output that arises from an additional unit of input
Diminishing marginal product
The property whereby the marginal product of an input declines as the quantity of the input increases
Fixed costs
Costs that don’t 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 ATC
Economies of scale
The property whereby long-run average total cost falls as the quantity of output increases
Diseconomies of scale
The property whereby long-run average total cost rises as the quantity of output increases
Constant returns to scale
The property whereby long-run average total cost stays the same as the quantity of output changes
Competitive market
A market with many buyers and sellers trading identical products so that each buyer an seller is a price taker
Aka perfectly competitive market
Average revenue
Total revenue divided by the quantity sold
Marginal revenue
The change in total revenue from an additional unit sold
Sunk cost
A cost that has already been committed and cannot be recovered
