question
explicit costs
answer
input costs that require an outlay of money by the firm
question
implicit costs
answer
input costs that do not require an outlay of money by the firm
question
accounting profit
answer
total revenue minus total explicit cost
question
economic profit
answer
a firm's total revenue minus its explicit and implicit costs
question
normal profit
answer
the accounting profit earned when all resources earn their opportunity cost
question
optimal output rule
answer
profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost
question
production function
answer
the relationship between quantity of inputs used to make a good and the quantity of output of that good
question
fix cost
answer
a cost that does not change, no matter how much of a good is produced
question
variable cost
answer
a cost that rises or falls depending on how much is produced
question
total cost
answer
the sum of fixed and variable costs
question
short run costs
answer
fixed costs and variable costs
question
long run costs
answer
all costs are variable, no fixed costs
question
minimum-cost output
answer
the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.
question
economics of scale
answer
factors that cause a producer's average cost per unit to fall as output rises
question
Diseconomics of Scale
answer
forces that may eventually increase a firm's average cost as the scale of operation increases in the long run
question
constant returns to scale
answer
the situation in which a firm's long-run average costs remain unchanged as it increases output
question
sunk cost
answer
a cost that has already been committed and cannot be recovered
question
price taker
answer
a buyer or seller that is unable to affect the market price
question
perfectly competitive market
answer
A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
question
standardized products
answer
Products that are identical and have the same value.
question
free entry and exit
answer
when new producers can easily enter into an industry and existing producers can easily leave that industry
question
break even price
answer
The price where average revenue is equal to average total cost. Below this price, the firm will shut down in the long run.
question
shut down price
answer
The price where average revenue is equal to average variable cost. Below this price, the firm will shut down in the short run.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
