question
accounting profit
answer
total revenue minus total explicit cost
question
economic profit
answer
total revenue minus total cost, including both explicit and implicit costs
question
average fixed cost
answer
total fixed cost/ total output
question
average total cost
answer
total cost divided by the quantity of output
question
average variable cost
answer
total variable costs/ total outptut
question
total cost
answer
fixed costs + variable costs
question
normal profit
answer
zero economic profit, when price=average total cost
question
marginal product
answer
the change in total output from an additional labor or capital input
question
marginal cost
answer
change in cost divided by change in quantity
question
explicit costs
answer
money spent on materials, utilities, labor, rent, capital
question
implicit costs
answer
the opportunity costs associated with production
question
total revenue
answer
Price x Quantity
question
profit maximization
answer
Marginal revenue = marginal cost.
question
5 characteristics of perfect competition
answer
-many small firms
-identical products(perfect substitutes)
-low barriers-easy exit and entry
-seller has no need to advertise
-firms are "price takers"=must charge the market price
question
long run equilibrium
answer
PCF's are earning normal profit,
question
if short run profit firms enter the industry
answer
increase in supply, increase in quantity supplied, decrease in price
question
if there is short run economic loss firms exit industry
answer
decrease in supply, decrease in quantity supplied, increase in price
question
shut down rule
answer
Total revenue> Total variable cost= open
total variable cost> total revenue= close
price> average variable cost= open
average variable cost> price= close
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