The amount a firm receives for the sale of its output

The market value of the inputs a firm uses in production (Explicit costs + Implicit costs, Fixed costs + Variable costs, etc.)

Input costs that require an outlay of money by the firm

Input costs that do not require an outlay of money by the firm

Total revenue - total cost (explicit and implicit costs)

Total revenue - total explicit cost

Relationship between the quantity of inputs used to make a good and the quantity of output of that good

The increase in output that arises from an additional unit of input

Diminishing marginal product:

marginal product of an input declines as the quantity of the input increases (production function- flatter as input quantity increases, slope decreases)

Relationship between quantity produced and total cost (as production rises- total-cost curve grows steeper, production function becomes flatter)

Costs that do not vary with the quantity of output produced

Costs that vary with the quantity of output produced

Fixed cost divided/quantity of output

Average variable cost:

Variable cost/quantity of output

The increase in total cost that arises from an extra unit of production (Change in total cost/Change in quantity)

Rising Marginal Cost:

rises as the quantity of output produced increase, Upward slope reflects diminishing marginal product

Quantity that minimizes average total cost; where the bottom of the U-shape occurs

Bottom of the U-Shape:

occurs at the quantity that minimizes average total cost

MC/ATC-Curve Cross-Section:

The marginal-cost curve crosses the average-total-cost curve at its minimum

Firms obtain this in the long run

Long Run Cost Curves:

Much flatter than short-run cost curves

Short Run Cost Curves:

Lie on or above the long-run cost curves

Long-run average total cost falls as the quantity of output increases

Constant returns to scale:

Long-run average total cost stays the same as the quantity of output changes

Diseconomies of scale:

Long-run average total cost rises as the quantity of output increases

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Chap 14 Econ

Question	Answer
Total revenue:	The amount a firm receives for the sale of its output
Total cost:	The market value of the inputs a firm uses in production (Explicit costs + Implicit costs, Fixed costs + Variable costs, etc.)
Profit:	Total revenue - total cost
Explicit costs:	Input costs that require an outlay of money by the firm
Implicit costs:	Input costs that do not require an outlay of money by the firm
Economic profit:	Total revenue - total cost (explicit and implicit costs)
Accounting profit:	Total revenue - total explicit cost
Production function:	Relationship between the quantity of inputs used to make a good and the quantity of output of that good
Marginal product:	The increase in output that arises from an additional unit of input
Diminishing marginal product:	marginal product of an input declines as the quantity of the input increases (production function- flatter as input quantity increases, slope decreases)
Total-cost curve:	Relationship between quantity produced and total cost (as production rises- total-cost curve grows steeper, production function becomes flatter)
Fixed costs:	Costs that do not vary with the quantity of output produced
Variable costs:	Costs that vary with the quantity of output produced
Average total cost:	Total cost/quantity of output
Average fixed cost:	Fixed cost divided/quantity of output
Average variable cost:	Variable cost/quantity of output
Marginal cost:	The increase in total cost that arises from an extra unit of production (Change in total cost/Change in quantity)
Rising Marginal Cost:	rises as the quantity of output produced increase, Upward slope reflects diminishing marginal product
Efficient Scale:	Quantity that minimizes average total cost; where the bottom of the U-shape occurs
MC<ATC:	Average total cost is falling
MC>ATC:	Average total cost is rising
Bottom of the U-Shape:	occurs at the quantity that minimizes average total cost
MC/ATC-Curve Cross-Section:	The marginal-cost curve crosses the average-total-cost curve at its minimum
Short Run Decisions:	Fixed
Long Run Decisions:	Variable
Greater Flexibility:	Firms obtain this in the long run
Long Run Cost Curves:	Much flatter than short-run cost curves
Short Run Cost Curves:	Lie on or above the long-run cost curves
Economies of scale:	Long-run average total cost falls as the quantity of output increases
Constant returns to scale:	Long-run average total cost stays the same as the quantity of output changes
Diseconomies of scale:	Long-run average total cost rises as the quantity of output increases

Created by: IanMcCormick20

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