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Accounting profit
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total revenue minus total explicit cost
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law of diminishing returns
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the property whereby the marginal product of an input tends to decline as the quantity of the input 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 quantity of output changes
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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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economic profit
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total revenue minus total cost (including both implicit and explicit)
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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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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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marginal cost
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the increase in total cost that arises from an extra unit of production
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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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total cost
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the market value of the inputs a firm uses in production
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variable costs
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costs that vary with the quantity of output produced
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shutdown point
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the lowest price at which a profit-maximizing firm would choose to produce rather than shut down in the short run; found at the low-point on the average variable cost curve
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breakeven point
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the lowest price at which a firm's revenues can cover its total economic costs; found at the low point of the average total cost curve
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factors of production
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the inputs used to produce goods and services
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marginal product of labor
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the increase in the of an output from an additional unit of labor
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budget constraint
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the limit on the consumption bundles that a consumer can afford
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income effect
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the change in consumption that results when a price change moves the consumer to a higher or lower indifference curve
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substitution effect
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the change in consumption that results when a price change moves the consumer along a given indifference curve to a point with a new marginal rate of substitution
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indifference curve
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a curve that shows consumption bundles that give the consumer the same level of satisfaction
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utility
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the satisfaction or happiness a consumer gets from consumption
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total revenue
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the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold
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