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19 Cards in this Set
- Front
- Back
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Profit?
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Total Revenue - Total Cost
Π= TR-TC = (P-AC)Q = (AR-AC)Q |
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Profit maximization vs. revenue maximization
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Revenue Maximization = Maximizing the amount you make from selling a good/service
Profit Maximization = Maximizing the amount you make when total cost is added. |
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Total revenue
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The amount a firm recives for the sale of it's output
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Total cost
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The market value of the inputs a firm uses in production.
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Explicit cost
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Imput cost that require an outlay of money by the firm.
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Implicit cost
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Input costs that do not require an outlay of money by the firm.
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Opportunity Cost
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Whatever must be given up to obtain some item
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Fixed Cost
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Cost that do not vary with the quantity of output produced
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Variable Cost
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Costs that do vary with the quantity of output produced
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Production Function
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The relationship between quantity of inputs used to make a good and the quantity of output of that good.
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Marginal Product
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The increase in output that arises from an additional unit of input.
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Diminishing Marinal Product
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The property whereby the marginal product of an input declines as the quantity of the input increases.
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Production function-cost relationship
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As production per input goes up, the cost per output unity goes down. Profit increases.
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Total, average, and marginal measurements
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What you want to find out. The total/average/marginal number of ties at Wal-Mart
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Efficient Scale
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The quantity of output that minimizes average total cost.
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Characteristics of a Competitive Market
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Many Buyers
Many Sellers Homogenous Goods Free entry and exit into market |
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Sunk Cost
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A cost that has already been committed and cannot be recovered.
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Shut Down Decision: Short Run: TR vs. TVC
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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.
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Shut Down Decision: Short Run: P vs. AVC
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Is Average Variable Cost is less than price, short run company should produce to cover variable cost.
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