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Micro Ch 7
Stack based on Chapter 7 of Principles of Microeconomics 3e
| Term | Definition |
|---|---|
| accounting profit | total revenues minus explicit costs, including depreciation |
| average total cost | total cost divided by the quantity of output |
| average variable cost | variable cost divided by the quantity of output |
| constant returns to scale | expanding all inputs proportionately does not change the average cost of production |
| diminishing marginal productivity | general rule that as a firm employs more labor, eventually the amount of additional output produced declines |
| diseconomies of scale | the long-run average cost of producing output increases as total output increases |
| economic profit | total revenues minus total costs (explicit plus implicit costs) |
| economies of scale | the long-run average cost of producing output decreases as total output increases |
| explicit costs | out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials |
| factors of production (or inputs) | resources that firms use to produce their products, for example, labor and capital |
| fixed cost | cost of the fixed inputs; expenditure that a firm must make before production starts and that does not change regardless of the production level |
| implicit costs | opportunity cost of resources already owned by the firm and used in business, for example, expanding a factory onto land already owned |
| long run | period of time during which all of a firm’s inputs are variable |
| marginal cost | the additional cost of producing one more unit; mathematically, 𝑀𝐶=𝛥𝑇𝐶/𝛥𝐿 |
| marginal product | change in a firm’s output when it employees more labor; mathematically, 𝑀𝑃=𝛥𝑇𝑃/𝛥𝐿 |
| revenue | income from selling a firm’s product; defined as price times quantity sold |
| short run | period of time during which at least one or more of the firm’s inputs is fixed |
| total cost | the sum of fixed and variable costs of production |
| variable cost | cost of production that increases with the quantity produced; the cost of the variable inputs |
Created by:
CheriseSLCC
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