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23 Cards in this Set
- Front
- Back
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Profits | Losses |
determined by calculating the difference between expenses and revenues |
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Total Revenue |
the amount a firm receives from the sale of the goods and services it produces |
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Total Cost |
the amount a firm spends in order to produce the goods and services it produces |
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Explicit Costs |
tangible out-of-pocket expenses |
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Implicit Costs |
the opportunity costs of doing business |
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Accounting Profit |
calculated by subtracting the explicit costs from total revenue |
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Economic Profit |
calculated by subtracting both the explicit and the implicit costs of business from total revenue |
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Output |
the production the firm creates |
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Factors of Production |
the inputs (labor, land, & capital) used in producing goods and services |
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Production Function |
describes the relationship between inputs a firm uses and the output it creates |
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Marginal Product |
the change in output associated with one additional unit of an input |
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Diminishing Marginal Product |
occurs when successive increases in inputs are associated with a slower rise in output |
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Variable Costs |
change with the rate of output |
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Fixed Costs |
are unavoidable; they do not vary with output in the short run |
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Average Variable Cost (AVC) |
determined by dividing total variable costs by the output |
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Average Fixed Cost (AFC) |
determined by dividing total fixed costs by the output |
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Average Total Cost (ATC) |
the sum of average variable cost and average fixed cost |
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Marginal Cost (MC) |
the increase in cost that occurs from producing additional output |
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Efficient Scale |
the output level that minimizes the average total cost |
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Scale |
refers to the size of the production process |
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Economies of Scale |
occur when costs decline as output expands in the long run |
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Diseconomies of Scale |
occur when costs rise as output expands in the long run |
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Constant Returns to Scale |
occur when costs remain constant as output expands in the long run |
