Microeconomics Unit 3 Vocab (Part 1)

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Posted on

March 14th, 2023

question

Economic Costs

answer

payments that must be made to obtain and retain the services of a resource

question

Explicit Costs

answer

monetary payments a firm makes to buy resources (wages, interest, rent)

question

Implicit Costs

answer

cost that is represented by lost opportunity in the use of a company's own resources

question

Fixed Costs

answer

costs that are independent of output

question

Variable Costs

answer

costs that vary with output

question

Accounting Profit

answer

Revenue-Cost or Revenue-FC-VC

question

Economic Profit

answer

Revenue-Cost-OC

question

Normal Profit

answer

difference between accounting and economic profit (=implicit costs and =opportunity cost)

question

Short Run

answer

a key factor of production is fixed (capital) while other inputs are variable (labor)

question

Long Run

answer

all inputs/resources/factors are variable, firms enter and exit the market, neither is a specific time period

question

Total Product

answer

total output of good/service

question

Average Product

answer

how much product is produced per worker (TP/Units of Labor)

question

Marginal Product

answer

Change in TP/Change in Unit of Labor

question

Law of Diminishing Productivity

answer

in the short run, as firms provide more of a variable input with a fixed input, the MP of the variable input eventually declines

question

AFC

answer

TFC/Q (as Q increases AFC decreases)

question

AVC

answer

TVC/Q

question

ATC

answer

TC/Q (ATC = AFC + AVC because TC = FC + VC)

question

Marginal Cost

answer

Change in TC/Change in Q

question

LRATC

answer

lowest ATC at which a firm can produce different levels of output when all inputs are variable

question

Economies Of Scale

answer

Labor and capital increase by 10%, quantity increases by 20% (double)

question

Constant Returns to Scale

answer

Labor and capital increase by 10%, quantity increase by 10% (same)

question

Diseconomies of Scale

answer

Labor and capital increase by 10%, quantity increases by 5% (half)

1 of 22

question

Economic Costs

answer

payments that must be made to obtain and retain the services of a resource

question

Explicit Costs

answer

monetary payments a firm makes to buy resources (wages, interest, rent)

question

Implicit Costs

answer

cost that is represented by lost opportunity in the use of a company's own resources

question

Fixed Costs

answer

costs that are independent of output

question

Variable Costs

answer

costs that vary with output

question

Accounting Profit

answer

Revenue-Cost or Revenue-FC-VC

question

Economic Profit

answer

Revenue-Cost-OC

question

Normal Profit

answer

difference between accounting and economic profit (=implicit costs and =opportunity cost)

question

Short Run

answer

a key factor of production is fixed (capital) while other inputs are variable (labor)

question

Long Run

answer

all inputs/resources/factors are variable, firms enter and exit the market, neither is a specific time period

question

Total Product

answer

total output of good/service

question

Average Product

answer

how much product is produced per worker (TP/Units of Labor)

question

Marginal Product

answer

Change in TP/Change in Unit of Labor

question

Law of Diminishing Productivity

answer

in the short run, as firms provide more of a variable input with a fixed input, the MP of the variable input eventually declines

question

AFC

answer

TFC/Q (as Q increases AFC decreases)

question

AVC

answer

TVC/Q

question

ATC

answer

TC/Q (ATC = AFC + AVC because TC = FC + VC)

question

Marginal Cost

answer

Change in TC/Change in Q

question

LRATC

answer

lowest ATC at which a firm can produce different levels of output when all inputs are variable

question

Economies Of Scale

answer

Labor and capital increase by 10%, quantity increases by 20% (double)

question

Constant Returns to Scale

answer

Labor and capital increase by 10%, quantity increase by 10% (same)

question

Diseconomies of Scale

answer

Labor and capital increase by 10%, quantity increases by 5% (half)

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