Week 12 ECON 2020 Flashcards
Economic Profit
Total revenue - Total cost (Including explicit and implicit costs)
Accounting Profit
Total revenue - Explicit costs
Explicit Costs
Input costs that require an outlay of money by the firm
Implicit Costs
Input costs that do not require an outlay of money by the firm (Opportunity costs)
Production Function
The relationship between the quantity of inputs used to make a good and the quantity of output of that good
How do you calculate marginal product?
The increase in output that arises from an additional unit of input
Why does diminishing marginal productivity occur?
Diminishing marginal productivity occurs when the input becomes less efficient. Example: Too many cooks in a kitchen get in each others way, so each chef has a lower output than if there were fewer
How do you calculate average total cost?
Total cost divided by the quantity of output
How do you calculate average fixed cost?
Fixed cost divided by the quantity of output
How do you calculate average variable cost?
Variable cost divided by the quantity of output
How do you calculate marginal cost?
The increase in total cost that arises from an extra unit of production
What does an upward curve in the marginal cost curve show?
Diminishing marginal product
