Production And Costs Flashcards
Total cost
The market value of the inputs a firm uses in production
Total revenue
The amount a firm receives for the sale of its output
Profit
Total revenue - total cost
Opportunity cost
What you give up to get something else
Explicit cost
Input costs that require an outlay of money
Out of pocket payment
Implicit costs
Input costs that don’t require outlay of money by the firm
Economic profit
(Equals) total revenue (minus) explicit cost (minus) implicit cost
Accounting profit
(Equals) total revenue (minus) explicit cost
The difference between economic profit and accounting profit
Implicit costs
Production
The relationship between quantity of inputs used to make a good and the quantity output in that good.
Marginal product
The increase in output that arises from an that arises from an additional unit of input
Diminishing marginal product
When the marginal product of an input declines as the quantity of input increases
