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15 Cards in this Set
- Front
- Back
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firm
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organization that provides goods or services
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price-taker
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any firm that takes the market price as given; this firm cannot affect the market price because the market is competitive
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competitive market
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a market in which no firm has the power to affect the market price of a good
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profits
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total revenue received from selling minus total costs of producing the product
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total revenue
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the price per unit times the quantity the firm sells
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total costs
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the sum of all costs incurred in producing goods and services
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production function
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a relationship that shows the quantity of output for any given amount of input
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marginal product of labor
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the change in production due to a one-unit increase in labor input
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diminishing returns to labor
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a situation in which the increase in labor declines with increasing labor input; a decreasing marginal product of labor
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variable costs
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costs of production that vary with the quantity of production
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fixed costs
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costs of production that do not depend on the quantity of production
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marginal cost
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the change in total costs due to a one-unit change in total quantity demanded
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profit maximization
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an assumption that firms try to achieve the highest possible level of profits - total revenue minus total cost, given their production functions
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marginal revenue
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the change in total revenue due to a one-unit increase in quantity sold
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producer surplus
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the difference between the price received by a firm for an addition item sold and the marginal cost of the item's production; for the market as a whole, it is the sum of all the individual firms' production surpluses, or the area above the market supply curve below the market price
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