Quiz #3 (Chp 11, 13, 14) Flashcards
Profit eq.
P = R - C π = TR - TC
Explicit Cost
Costs that must be paid. Costs that require an outlay of money by the firm.
Implicit Cost
Input costs that do not require an outlay of money by the firm.
Accounting Profit eq.
TR - TEC (total economic cost)
Economic Profit eq.
TR-TC ; including both explicit & implicit costs
Fixed Cost
Costs that do not vary w/the quantity of output produced
Variable Cost
Costs that vary w/the quantity of output produced
Total Cost
Market value of the input a firm uses in production
Marginal Cost
The increase in total cost that arises from an extra unit of production
Average Fixed Cost
Fixed cost dived by the quantity of output
Average Variable Cost
Variable cost divided by the quantity of output
Average Total Cost eq.
ATC = TC/q ATC= AFC + AVC
Economies of Scale
When long-run ATC declines as more products are produced
Diseconomies of Scale
When long-run ATC increase as more products are produced
Excludable Good
Goods that can be prevented from use
Rival in Consumption Good
Use of the good diminishes the ability of another to use the same good
Public Good
Neither Excludable nor Rival in Comparison; EX National Defense, Basic Research, Fighting Poverty
Free rider
A person who receives the benefit of a good but avoids paying for it.
Common Resources
Rival in Comparison but not Excludable; EX Clean Air and Water, Congested Roads, Fish, Whales, other Wildlife
Shut down eq.
P < AVC
TR < VC
TR/Q < VC/Q
