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19 Cards in this Set

  • Front
  • Back
Total Revenue - Total Cost

Π= TR-TC = (P-AC)Q = (AR-AC)Q
Profit maximization vs. revenue maximization
Revenue Maximization = Maximizing the amount you make from selling a good/service

Profit Maximization = Maximizing the amount you make when total cost is added.
Total revenue
The amount a firm recives for the sale of it's output
Total cost
The market value of the inputs a firm uses in production.
Explicit cost
Imput cost that require an outlay of money by the firm.
Implicit cost
Input costs that do not require an outlay of money by the firm.
Opportunity Cost
Whatever must be given up to obtain some item
Fixed Cost
Cost that do not vary with the quantity of output produced
Variable Cost
Costs that do vary with the quantity of output produced
Production Function
The relationship between quantity of inputs used to make a good and the quantity of output of that good.
Marginal Product
The increase in output that arises from an additional unit of input.
Diminishing Marinal Product
The property whereby the marginal product of an input declines as the quantity of the input increases.
Production function-cost relationship
As production per input goes up, the cost per output unity goes down. Profit increases.
Total, average, and marginal measurements
What you want to find out. The total/average/marginal number of ties at Wal-Mart
Efficient Scale
The quantity of output that minimizes average total cost.
Characteristics of a Competitive Market
Many Buyers
Many Sellers
Homogenous Goods
Free entry and exit into market
Sunk Cost
A cost that has already been committed and cannot be recovered.
Shut Down Decision: Short Run: TR vs. TVC
If Total Revenue is greater than Total Variable Cost, short run should produce because they'd lose less and you never know when the market might go boom.
Shut Down Decision: Short Run: P vs. AVC
Is Average Variable Cost is less than price, short run company should produce to cover variable cost.