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economic cost
answer
both explicit and implicit (opportunity cost)
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opportunity cost
answer
the loss of the chance to get/make/buy/ do the next best thing
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explicit cost
answer
visible expenses; out of pocket
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implicit cost
answer
non-visible cost; opportunity cost
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normal profit
answer
the accounting profit earned when all resources earn their opportunity cost
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accounting profit
answer
total revenue minus total explicit cost
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economic profit
answer
total revenue minus total cost, including both explicit and implicit costs
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short run vs long run
answer
In the short run, wages and other prices are fixed, while in the long run, everything is variable
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total product
answer
total output produced by the firm
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marginal product
answer
the increase in output that arises from an additional unit of input
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average product
answer
total product/units of labor
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law of diminishing return
answer
at a point, adding more resources will decrease production
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fixed cost
answer
a cost that does not change, no matter how much of a good is produced
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variable cost
answer
a cost that varies with changes in the level of output
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average variable cost
answer
variable cost divided by the quantity of output
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average total cost
answer
total cost divided by the quantity of output
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marginal cost
answer
the cost of producing one more unit of a good
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marginal revenue
answer
the additional income from selling one more unit of a good; sometimes equal to price
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economies of scale
answer
factors that cause a producer's average cost per unit to fall as output rises
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constant returns to scale
answer
the situation in which a firm's long-run average costs remain unchanged as it increases output
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diseconomies of scale
answer
increases in cost per unit when output increases
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Minimum Effiecent Scale
answer
the lowest level of output at which a firm can minimize long-run average total cost
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heterogeneous products
answer
each property has unique features
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un/differenciated products
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property does not have unique features
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price taker
answer
a firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm
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profit maximazation
answer
MR=MC
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loss minimization
answer
in the short run the firm only have two choices, to produce or shut down
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shut down loss
answer
in short run when P < AVC
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long run supply curve
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possibility of firm entering or exiting market
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productive efficiency
answer
operating at lowest cost P=ATC min
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allocative efficiency
answer
P=MC
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