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36 Cards in this Set
- Front
- Back
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firms profit
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total revenue-total costs
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depreciation
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fall in the value of the firms capital
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opportunity cost
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highest valued alternative forgone
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explicit cost
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cost paid in money. amount spent could have been spent on something else. ex. labor cost, interest paid to the bank, expenditure on products to produce good.
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implicit cost
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uses a factor of production but does not make a direct money payment for its use. 2 catagories- economic depreciation and cost of resources of the firms owner
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economic depreciation
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opportunity cost of the firm using capital that it owns. measured as the change in the market value of capital (market price of the capital at the beginning of a period-its market price at the end of a period)
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normal profit
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return to entrepreneurship. implicit cost
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economic profit
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total revenue-total cost
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total revenue
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amount recieved from the sale of the product
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total cost
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sum of the explicit costs and implicit costs and is the opportunity cost of production
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short run: fixed plant
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time frame in which the quantities of some resources are fixed. technology and capital.
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fixed factors of production
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fixed resources that a firm uses
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variable factors of production
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resources that it can vary
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firms plant
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collection of fixed resources
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to increase output in the short run
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a firm must increase the quantity of variable factors it uses
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long run: variable plant
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time frame in which the quantities of all resources can be varied.
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increase output in long run
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increase size of plant
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sunk cost
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difference between the cost of the plant and its resale value
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to increase output of a fixed plant
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firm must increase the quantity of labor it employs
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total product (TP)
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total quantity of a good produced in a given period. increases as quantity of labor employed increases
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marginal product (MP)
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change in total product that results from a one-unit increase in the quantity of labor employed.
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marginal product=
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change in total product/change in quantity of labor
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increasing marginal return
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occur when the marginal product of an additional worker exceeds the marginal product of the previous worker
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decreasing marginal returns
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occur when the marginal product of an additional worker is less than the marginal product of the previous worker
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average product (AP)
(productivity) |
total product per worker employed.
Average product=total product/Quantity of labor |
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average product is largest when...
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average product and marginal product are equal
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total cost (TC)
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cost of all the factors of production used by the firm
TC=TFC+TVC |
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total fixed cost (TFC)
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cost of a firm's fixed factors of production
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total variable cost (TVC)
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cost of a firms variable factor of production
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marginal cost
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change in total cost that results from a one unit increase in output
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average fixed cost (AFC)
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total fixed cost per unit of output. TV/Q=TFC/Q+TVC/Q
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Average variable cost (AVC)
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total variable cost per unit of output
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average total cost (ATC)
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total cost per unit of output
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u-shape of the average total cost curve arises from...
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spreading total fixed cost over a larger output and decreasing marginal returns
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a technological change that increases productivity shifts the total product curve...
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upward. also shifts marginal product curve and average product curve upward
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increase in price of a factor increases...
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costs and shifts cost curves
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