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Chapter 9 Key Terms
ECO 251
| Term | Definition |
|---|---|
| explicit costs | costs requiring monetary payments |
| implicit costs | opportunity costs of resources used by a firm |
| economic profits | total revenue - (explicit + implicit costs) |
| normal profits | the normal accounting profit that is earned by firms with similar resources, considered part of the opportunity costs of using the resources |
| short run (sr) | a time period in which at least one resource is fixed and a firm cant leave the industry |
| long run (lr) | a time period when all resources can be varied and a firm can exit from the industry |
| total product | the number of units produced in a time period |
| marginal product | the additional output produced from one extra unit of an input (e.g. one more worker) |
| law of diminishing (marginal) returns | as additional units of an input are hired, eventually the marginal product will decline |
| average product | the number of units produced per worker |
| fixed costs | costs that do not depend upon the level of output produced (considered to be sunk) |
| variable costs | costs that depend upon the production level |
| marginal costs | the additional costs associated from producing one extra unit of a good |
| economies of scale | when the LRAC declines as the scale of production increases |
| diseconomies of scale | when the LRAC rises as the scale of production increases |
| constant returns to scale | when the LRAC remains constant as the scale of production increases |
| minimum efficient scale | the minimum scale of production required for lowest LRAC to occur (where economies of scale end) |
Created by:
SavanahT
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