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15 Cards in this Set

  • Front
  • Back
Explicit Costs
Outgoing payments for the use of resources needed to produce the good or service
Examples of Explicit Costs
Electricity, Employee Wages, Rent, Supplies, etc
Implicit Costs
Owner supplied resources used in producing the good or service and forgone costs associated with them. "Opportunity costs" of owning a business
Examples of Implicit Costs
Salaries forgone, Interest Forgone, Normal Profit
Short Run
Fixed. In the SR firms can not change the size of their plant, factory, or facility. The resource is fixed. Other resources like labor and supplies or material can be altered.
Long Run
In the long run, the plant or factor can vary. We can build onto it, build another one in a different location, or even close a factory. All resources become variable in the long run.
Examples of Long Run
1). JCCC Builds a new classroom Building
2). AMC Theater adds a balcony
Examples of Short Run
1). China Starr adds second buffett station
Law of Diminishing Returns
The more of one resource you add to some fixed resource (land) at some point the additional output you get diminishes
Fixed Costs
Fixed costs are costs that don't change with the level of production
Examples of Fixed Costs
rent, insurance premiums, salaried employees, bank loans on capital, fixed taxes, depreciation, leases, salaries
Variable Costs
Costs that vary with output
Examples of Variable Costs
Laborers (hourly wages), Utilities, Supplies, Advertising, transportation
Productive Efficiency
Occurs when firms are employing the least cost methods of production. This happens when price of the product is equal to the minimum of the ATC. P=Min ATC.
Allocative Efficiency
means society is getting enough of the product. this occurs when p=mc