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20 Cards in this Set
- Front
- Back
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average fixed cost |
Total fixed cost divided by total output |
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average product |
The total output produced per unit of a resource employed (total product divided by quantity of that resource employed) |
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average total cost |
A firm's total cost divided by output; equal to AFC plus AVC |
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constant returns to scale |
Cost per unit output is constant as output rises |
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diseconomies of scale |
Increases in the ATC of producing a product as the firm expands the size of its plant (its output) in the long run |
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economic cost |
Payment that must be made to obtain and retain the services of a resource; income a firm must supply to attract the resource away from an alternative use |
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economic profit |
The total revenue of a firm less its economic costs; pure profit |
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economies of scale |
Reductions in ATC of producing a product as the firm expands the size of its plant (its output) in the long run |
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explicit costs |
Monetary payment a firm must make to an outsider to obtain a resource |
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fixed costs |
And cost that in total does not change when the firm changes its output; the cost of fixed resources |
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implicit costs |
Monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; includes normal profit |
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law of diminishing returns |
Relationship between employees and output. As successive increments of a variable resource are added to a fixed resource the marginal product of the variable resource will eventually decrease |
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long run |
Period of time long enough to enable producers of a product to change the quantities of all the resources they employ |
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marginal cost |
Additional cost of supplying another unit of output. Divide change in total cost by change in output |
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marginal product |
Additional output produced when one additional unit of resource is employed |
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minimum efficient scale |
If LRATC curve reaches a minimum, the level of output at which the minimum occurs |
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natural monopoly |
An industry in which economies of scale are so great than a single firm can produce the product at a lower ATC than would be possible if more than 1 firm produced the poduct |
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normal profit |
Payment made by a firm to obtain and retain entrepreneurial ability |
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short run |
A period of time in which producers are able to change the quantities of some but not all of the resources they employ |
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total cost |
The sum of fixed and variable costs |
