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Total Revenue
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the amount a firm receives for the sale of its output.
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Total Costs
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the market value of the inputs a firm uses in production.
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Profit
answer
total revenue - total cost
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Explicit Costs
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input costs that require an outlay of money by the firm.
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Implicit Costs
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input costs that do NOT require an outlay of money by the firm.
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Economic Profit
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total revenue- total cost; including both explicit and implicit costs.
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Accounting Profit
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total revenue - total explicit cost.
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Production Function
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the relationship between the quantity of inputs used to make a good and the quantity of output of that good.
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Marginal Product
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the increase in output that arises from an additional unit of input.
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Diminishing Marginal Product
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the increase in outputs that arises from an additional unit of input.
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Fixed Costs
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costs that do NOT vary with the quantity of output produced.
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Variable Costs
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costs that do vary with the quantity of output produced.
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Average Total Cost
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total cost/quantity of output
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Average fixed cost
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fixed cost/quantity of output
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Average variable cost
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variable cost/quantity of output
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Marginal Cost
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the increase in total cost that arises from an extra unit of production.
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Efficient Scale
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the quantity of output that minimizes average total cost.
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Economies of Scale
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the property whereby long-run average total cost FALLS as the quantity of output increases.
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Diseconomies of Scale
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the property whereby long-run average total cost RISES as the quantity of output increases.
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Constant Returns to Scale
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the property whereby long-run average total cost stays the SAME as the quantity of output changes.
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Competitive Market
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a market w many buyers and sellers trading identical products so that each buyer and seller is a price taker.
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Average Revenue
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total revenue/quantity sold
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Marginal Revenue
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the change in total revenue from an additional unit sold.
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sunk cost
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a cost that has already been committed and CANNOT be recovered.
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Monopoly
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a firm that is the sole seller of a product without any close substitutes.
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Natural Monopoly
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a type of monopoly that arises because a singl firm can supply a good/service to an entire market at a lower cost.
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Price Discrimination
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the business practice of selling the same good at different prices to different customers.
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