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### 35 Cards in this Set

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 sum of firm's revenues, cost, and profit over a period of time - shows firm's revenue, costs, profit for firm's fiscal year Income Statement firms revenue - operating expenses and taxes paid. -not ideal becuase is neglects some of the firm's cost Accounting Profit highest valued alternative that must be given up to engage in an activity Opportunity Cost cost that involves spending money Explicit Cost cost not involving money -time could be spent sleeping or working to earn \$ Implicit Cost include explicit and implicit costs -because accounting profit exclude some implicit costs, it will be larger than economic profit Economic Costs period of time when at least one firm's inputs is fixed -firm's technology and size of its physical plant (factory, store, office) are both fixed, while # of workers the firm hires is variable Short Run period of time long enough to alow a firm to vary all of its inputs, to adopt new technology, and to increase or decrease the size of its physical plant. Long Run cost of all the inputs a firm uses in production Total Cost TC=FC+VC costs that change as output changes - labor costs, raw material costs, costs of electricity and other utilities Variable Costs Costs that remain constant as output changes - lease payments for factory or retail space, payments for fire insurance, payments for newspaper and television advertising. Fixed Costs the relationship between the inputs employed by a firm and the maximum output it can produce with those inputs Production Function TC/Q Average Total Cost additional output a firm produces as a result of hiring one more worker Marginal product of labor at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline Law of diminishing returns total output produced by a firm divided by the quantity of workers - is the average of the marginal products of labor Average product of labor change in a firm's total cost from producing one more unit of a good or servies -change in total cost/ change in quantity marginal cost FC/Q Average Fixed Cost VC/Q Average Variable Cost When MCAVC or AFC When MC=AVC or AFC decrease increase minimum points In the long run all costs are variable...there are no fixed costs in the long run. In long run... TC=VC and ATC=AVC curve showing the lowest cost at which the firm is able to produce a given quantity of output in the long run, when no inputs are fixed. long-run average cost curve exist when a firm's long run average costs fall as it increases output economies of scale a market that meets the conditions of (1) many buyers and sellers (2) all firms selling identical products (3) no barriers to new firms entering the market perfectly competitive market buyer or seller that is unable to affect the market price price taker TR-TC Profit TR/# units sold Average Revenue change is TR from selling one more unit Marginal Revenue difference between TR and TC is the greatest MR=MC profit-maximizing level of output firm's revenues minus all its costs, implicit and explicit economic profit situation in which a firm's total revenue is less than its total cost, including all implicit costs economic loss situation in which the entry and exit of firms has resulted in the typical firm breaking even long run competitive equilibrium curve showing the relationship in the long run between market price and the quantity supplied long run supply curve a good or service is produced at the lowest possible cost productive efficiency production reflects consumer preferences, in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it allocative efficiency