Microeconomics: Chapter 8: Business Costs and Production

question

profit

answer

occurs whenever total revenue is higher than total cost

question

loss

answer

occurs whenever total revenue is less than total cost

question

total revenue

answer

the amount a firm receives from the sale of goods and services

question

total cost

answer

the amount a firms spends to produce and/or sell goods and services

question

explicit costs

answer

tangible, out-of-pocket costs

question

implicit costs

answer

the costs of the resources that are already owned, for which there is no out of pocket payment. It is also known as an opportunity cost

question

accounting profit

answer

profit that is calculated by subtracting the explicit costs from total revenue

question

economic profit

answer

profit that is calculated by subtracting the explicit and implicit costs of business from total revenue

question

output

answer

the product a firm creates, also known as quantity

question

factors of production

answer

inputs used in producing goods and services

question

input

answer

a resource used in the production process to generate a firms output

question

production function

answer

describes the relationship between inputs a firm uses and the output it creates

question

marginal product

answer

the change in output associated with one additional unit of input

question

diminishing marginal product

answer

occurs when successive increases in inputs are associated with a slower rise in output

question

variable costs

answer

costs that change with the rate of output

question

fixed costs

answer

unavoidable costs that do not vary with the output in the short run

question

average variable cost

answer

cost determined by dividing total variable cost by the output

question

average fixed cost

answer

cost determined by dividing total fixed cost by the output

question

average total cost

answer

the sum of the average variable cost and overage fixed cost

question

marginal cost

answer

the increase in cost that occurs from producing one additional unit of output

question

scale

answer

refers to the size of the production process

question

efficient scale

answer

the output level that minimizes average total cost in the long run

question

economies of scale

answer

occurs when long run average total cost declines as output expands

question

diseconomies of scale

answer

occurs when long average total cost rise as output expands

question

constant returns to scale

answer

occurs when long run average total costs remain constant as output expands

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question

profit

answer

occurs whenever total revenue is higher than total cost

question

loss

answer

occurs whenever total revenue is less than total cost

question

total revenue

answer

the amount a firm receives from the sale of goods and services

question

total cost

answer

the amount a firms spends to produce and/or sell goods and services

question

explicit costs

answer

tangible, out-of-pocket costs

question

implicit costs

answer

the costs of the resources that are already owned, for which there is no out of pocket payment. It is also known as an opportunity cost

question

accounting profit

answer

profit that is calculated by subtracting the explicit costs from total revenue

question

economic profit

answer

profit that is calculated by subtracting the explicit and implicit costs of business from total revenue

question

output

answer

the product a firm creates, also known as quantity

question

factors of production

answer

inputs used in producing goods and services

question

input

answer

a resource used in the production process to generate a firms output

question

production function

answer

describes the relationship between inputs a firm uses and the output it creates

question

marginal product

answer

the change in output associated with one additional unit of input

question

diminishing marginal product

answer

occurs when successive increases in inputs are associated with a slower rise in output

question

variable costs

answer

costs that change with the rate of output

question

fixed costs

answer

unavoidable costs that do not vary with the output in the short run

question

average variable cost

answer

cost determined by dividing total variable cost by the output

question

average fixed cost

answer

cost determined by dividing total fixed cost by the output

question

average total cost

answer

the sum of the average variable cost and overage fixed cost

question

marginal cost

answer

the increase in cost that occurs from producing one additional unit of output

question

scale

answer

refers to the size of the production process

question

efficient scale

answer

the output level that minimizes average total cost in the long run

question

economies of scale

answer

occurs when long run average total cost declines as output expands

question

diseconomies of scale

answer

occurs when long average total cost rise as output expands

question

constant returns to scale

answer

occurs when long run average total costs remain constant as output expands

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