Cost Of Production In The Firm

Front 1

Explicit cost

Back 1

The cost of production excluding opportunity cost, that takes the form of cash payments.

Hint 1

Wages, rent, insurance, and taxes

Front 2

Implicit costs

Back 2

The firm's opportunity cost of employing it's own resources without corresponding cash payment.

Hint 2

Company car, buildings, family labor.

Front 3

Accounting profit

Back 3

The firm's revenue minus the explicit cost

Hint 3

Used to determine a firms taxable income

Front 4

Economic profit

Back 4

A firms total revenue minus the explicit and implicit cost.

Hint 4

This takes into account all the resources used in production

Front 5

Normal profit

Back 5

The accounting profit earned when all resources make at least the same as their opportunity cost.

Hint 5

This occurs when accounting profit equals implicit costs.

Front 6

Variable resource

Back 6

Any resource that can be varied in the short run to increase or decrease production.

Hint 6

Altered to change output rate.

Front 7

Fixed resource

Back 7

Resources that cannot be altered esially or in the short run

Hint 7

An Example of these resources are buildings

Front 8

Short run

Back 8

A period in which at least one of the firm's resources is fixed

Hint 8

Variable resources effect this time frame

Front 9

Long run

Back 9

A term under which all of a firms resources are variable.

Hint 9

Nothing is effected by this time frame

Front 10

Total product

Back 10

A firms total output

Hint 10

The entire amount of goods a firm sells in a day.

Front 11

Production function

Back 11

The relationship between the the amount of resources employed and the firm's total product.

Front 12

Marginal product

Back 12

The change in total product that occurs when the use of a particular resource increases by one unit.

Hint 12

One worker makes 10 shirts. Add another and they make 23. The difference is 13. What does that number signify.

Front 13

Increasing marginal returns.

Back 13

The marginal product of a variable resource increases as each additional unit of that resource is employed

Hint 13

The marginal product increases as you add a resource.

Front 14

Law of diminishing marginal returns

Back 14

As more of a variable resource is added to a Givin am out of other resources, marginal product eventually declines and could become negative.

Hint 14

This states that if all other resources held constant, if you keep adding a resource to change production then eventually it will become negative. For example you run out of space on a farm if you buy alot of mowers.

Front 15

Fixed cost

Back 15

Any production that is independent of the firm's rate of output

Hint 15

Pays For Fixed Resources

Front 16

Variable cost

Back 16

Any production that changes as the rate of output changes

Hint 16

Pays for variable resources

Front 17

Total cost

Back 17

The sum of the fixed cost and variable cost TC=FC+VC

Hint 17

This includes the normal profit but not the economic profit

Front 18

Marginal cost

Back 18

The change in total cost resulting from a one unit change in output; the change in total cost devided by the change in output

Hint 18

Mc=🔺tc/🔺q

Front 19

Average variable cost

Back 19

Variable cost devided by output

Hint 19

AVC=VC/q

Front 20

Average total cost

Back 20

Total cost divided by output ; the sum of average fixed cost and average variable cost

Hint 20

ATC=AFC+AVC OR ATC=TC/q

Front 21

Economies of scale

Back 21

Forces that reduce a firms average cost as the scale of operation increases in the long run.

Hint 21

Long run average cost falls as output expands.

Front 22

Diseconomies of scale

Back 22

Forces that may eventually increase a firms average cost as the scale of operation increases in the long run

Hint 22

Result from a larger firm size

Front 23

Long run average cost curve

Back 23

A curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies.

Hint 23

Planning curve