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21 Cards in this Set
- Front
- Back
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Short run |
a period of time in which quantities of some of the resources that the firm uses is fixed a period of time in which the quantity of at least one factor of production used by a firm is fixed |
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short run example |
an electric power company may increase working hours but cant necessarily increase electricity production. Production is fixed, therefore it's in the short run |
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Sunk cost |
a cost that has already been made and can't be recovered |
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Long run |
a period in which all resources (inputs) require for production are variable |
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Total product |
the total quantity of a product or a service for my given quantity of the variable input (holding fixed the quantity of other inputs) maximum output that a given quantity of input can produce |
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Marginal Product |
change in the total product that results from hiring one more worker d/dx TP = MP |
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Average product |
total product divided by the quantity of labor employed |
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Implicit costs |
the opportunity cost of self-employed resources -the value of resources in their next best alternative use |
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Explicit costs |
the payment made to others for resources owned by them |
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Product Surplus |
(Price of that unit) - (Marginal cost of that unit) |
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Equilibrium condition |
when Quantity demanded = Quantity supplied |
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Price elasticity (of demand) |
shows the percent change in quantity for a 1% change in price ex if beer has a 1.19 price elasticity, that means that a 1% change in price of beer, changes the quantity demanded by 1.19% |
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Law of diminishing returns |
as successive units of a variable input are combined with fixed quantity of other required inputs, beyond a point, the marginal product of the variable input declines basically, variable input mixed with fixed input that declines marginal product |
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Total fixed cost |
does not change as output changes |
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Accounting costs |
= explicit costs |
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Economic costs |
= explicit costs (resources that belong to people) + implicit costs (opportunity costs) |
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Accounting profit |
= total revenue - accounting costs |
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Firm supply |
shows the profit maximizing output of a firm at a series of possible prices |
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Market supply |
the aggregate of profit maximizing supply of all firms in the market |
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Shut down point |
lowest price for the short run at which the item is produced a positive output is the minimum value of AVC |
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Profit maximization |
1) Find the largest output level for which MR >= MC - call this q0 Should you Produce? 2) compare TR (q0) with TC(q0) if TR (q0) >= TC(q0) then produce q0, otherwise produce zero |
