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24 Cards in this Set
- Front
- Back
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role of the firm |
organizes factors of production produces goods sells those produced goods |
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goals of the firm |
profit maximization |
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profit= |
total revenue-total cost |
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accounting profit= |
explicit revenue-explicit cost |
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in accounting, profit= |
total sales x price 1,000 earrings at $5 each= $5000 |
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total cost |
other expenses paid to workers and materials needed |
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for economists, total cost= |
amount received + increase in value of the assets owned |
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economic profit= |
(explicit+implicit revenue)-(explicit+implicit cost) |
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law of diminishing marginal productivity |
as more and more of a variable input is added to an existing fixed input, after some point, the additional output one gets from the additional input will fall |
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fixed cost |
costs spent and can not be changed in the period of time under consideration |
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variable cost |
change as output changes |
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total cost= |
FC+VC |
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Average Cost= |
TC/Q |
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Average Fixed Cost= |
FC/Q |
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Average variable cost= |
VC/Q |
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ATC= |
AFC+AVC |
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marginal cost |
increase or decrease of total cost from increasing or decreasing the level of output by one unit |
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MP>AP |
Average productivity is rising |
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MP |
average productivity is falling |
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relationship between cost curve and productivity curves |
mirror image reflections of each other -when one is increasing, the other is decreasing -when one is at minimum the other is at the maximum |
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relationship between marginal cost curve and average cost curve |
MC curves always intersect AC curve at the minimum of the curve MC curve goes through the minimum points of both AVC curve and ATC curve |
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MC>ATC |
ATC is rising |
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MC=ATC |
ATC is at a low point |
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MC |
ATC is falling |
