question
Total Revenue
answer
Price of product x Quantity
question
Marginal Revenue
answer
Change in Total Revenue
question
Profit
answer
TR-TC
question
Explicit Costs
answer
physical outlay of money for resources/inputs. Ex) Tuition, books, etc.
question
Implicit Costs
answer
Opportunity cost of using inputs. Ex) Lost income
question
Accounting Cost
answer
just explicit costs
question
Economic Cost
answer
explicit + implicit costs
question
Accounting Profit
answer
total revenue - explicit costs
question
Economic Profit
answer
total revenue minus explicit and implicit costs
question
Normal Profit
answer
TR = Explicit costs + Entrepreneurial talents
question
Short Run Production
answer
Time frame in which some inputs are fixed (typically capital) (affected by LDR)
question
Long Run Production
answer
All inputs are variable
question
Total Product
answer
Quantity output produced
question
Marginal Product
answer
Change in Total Product
question
Total Cost
answer
fixed cost + variable cost
question
Fixed Cost
answer
Costs that do not change with output (property tax, insurance, and some utilities)
question
Variable Cost
answer
Costs that change with output (labor costs and utilities)
question
ATC
answer
TC/Q
question
AFC
answer
FC/Q
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AVC
answer
VC/Q
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Marginal Cost
answer
change in total cost / change in quantity
question
Short Run Curve
answer
AFC - (Starts left then comes down to lowest point) Slopes downward approaching zero because you take a fixed amount divided by an increasing amount.
MC - (Starts at middle of curve, then slopes down, then increases up drastically) Sloped down then up because of the Law of Diminishing Returns. Always intersects the ATC and AVC at their lowest points.
AVC - (1st "U' shaped curve) U shaped because of the Law of Diminishing Returns.
ATC - (2nd "U" shaped curve) U shaped because of the Law of Diminishing Returns.
****ATC - AVC = AFC.
MC - (Starts at middle of curve, then slopes down, then increases up drastically) Sloped down then up because of the Law of Diminishing Returns. Always intersects the ATC and AVC at their lowest points.
AVC - (1st "U' shaped curve) U shaped because of the Law of Diminishing Returns.
ATC - (2nd "U" shaped curve) U shaped because of the Law of Diminishing Returns.
****ATC - AVC = AFC.
question
Long Run Curve
answer
LRATC - (bowl shaped curve) Derived from the tangent points of various sized plants SRATC curves.
Minimum Efficiency Scale - (located at the end of economies of scale) Lowest level of output at which the firm is efficient.
Economies of Scale - (first sector located to the far left of the curve) Cost declines as output increases.
Constant Returns to Scale - (middle sector of curve) Range of output where costs are constant.
Diseconomies of Scale - (far rights part of sector) Output increases as cost increases because the firm becomes too large to manage.
SRATC Small Plant - First "U" located far right of curve.
SRATC Medium Plant - Second "U" located in middle of curve.
SRATC Large Plant - Third "U" located far right of curve.
Minimum Efficiency Scale - (located at the end of economies of scale) Lowest level of output at which the firm is efficient.
Economies of Scale - (first sector located to the far left of the curve) Cost declines as output increases.
Constant Returns to Scale - (middle sector of curve) Range of output where costs are constant.
Diseconomies of Scale - (far rights part of sector) Output increases as cost increases because the firm becomes too large to manage.
SRATC Small Plant - First "U" located far right of curve.
SRATC Medium Plant - Second "U" located in middle of curve.
SRATC Large Plant - Third "U" located far right of curve.
question
Law of Diminishing Marginal Returns
answer
Adding factors of production to fixed factors of production will increase total output for a while but MP declines to the point TP declines.
question
Average Revenue
answer
TR/Q
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