Production and Costs Flashcards
Profit =
Total Revenue -Total Cost
Minimizing Costs
Getting the maximum outputs for a given set of inputs
Explicit Cost
Out of pocket costs that are normally paid (rent)
Implicit Cost
Opportunity Costs
Accounting Profits
Revenue - Explicit Costs
Economic Profits
Revenue - (explicit and implicit) costs; Can be negative and still be successful
Zero Economic Profit
Good thing (normal profit); if EP = 0, AP must be positive
Fixed Resources
Don’t change as you produce more (ovens)
Variable Resources
Change with amount produced (ingredients)
Short Run
Company has at least 1 fixed resource
Long Run
All inputs are variable
Productivity vs. Production
Productivity = how much does 1 more worker add to output?; Production = level of output produced
Eventually, why do you get less additional output when you add more variable resources?
Because of fixed resources (law of diminishing returns)
Total Costs
Fixed Costs + Variable Costs
Marginal Costs
Change in TC / Change in Output
