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
