Microeconomics Ch. 11

Front 1

long-run total cost curve

Back 1

other things equal relationship between output and total cost in the long run

Front 2

short-run total cost curve

Back 2

other things equal relationship between output and total cost in the short run

Front 3

fixed cost

Back 3

cost associated with the fixed factors of production in the short run

Front 4

variable cost

Back 4

cost associated with the variable factors of production

Front 5

total economic cost

Back 5

for any given output, the total opportunity cost of the factors of production used in producing and selling that output

Front 6

operating expenses

Back 6

total accounting costs incurred by the firm by producing and selling its output, including the explicit monetary costs and certain nonmonetary costs

Front 7

explicit monetary (operating) costs

Back 7

the firm's out-of-pocket payments for its factors of production plus the general sales and excise taxes paid by the firm on the sale of its products

Front 8

nonmonetary operating costs

Back 8

costs of production that do no involve out-of-pocket payments for factors of production, the most important being an estimate of the depreciation of the firm's stock of capital

Front 9

depreciation

Back 9

decline in the market value of the firm's stock of capital during the year

Front 10

opportunity cost of capital

Back 10

return that the owners of the firm could earn if the value of the capital they own were invested in their next best investment alternatives

Front 11

dividends

Back 11

portion of after-tax profits that the managers of the firm pay to the stockholder's

Front 12

retained earnings

Back 12

funds of the firm remaining from total revenues after paying all operating expenses, income taxes, and dividends; used to finance future investments

Front 13

opportunity cost of labor

Back 13

wage or salary available to the employees of a firm in their next best employment alternatives

Front 14

economic profit

Back 14

difference between total revenue and total economic cost

Front 15

total cost curve

Back 15

best possible relationship between a firm's total cost and its output; indicates either the minimum total cost of producing each level of output the firm might choose to produce or the maximum output obtainable for each given amount of total cost

Front 16

firm's how problem

Back 16

goal of producing the maximum output for a given total cost spent on factor's of production; alternatively, the goal of producing a given output for the minimum total cost spent on factors of production

Front 17

production function

Back 17

relationship between a firm's outputs and its inputs that indicates the maximum output attainable from all possible combination of inputs that the firm might use

Front 18

least-cost production curve

Back 18

solution to the firm's how problem, in which the firm equalizes the ratio of marginal product to price across all factors of production

Front 19

economies of scale (in terms of long-run total cost)

Back 19

region of the long-run total cost curve along which the percentage change in total cost is less than the percentage change in output

Front 20

economies of scale (in terms of the production function)

Back 20

equal proportionate increase in all the firm's inputs by an amount k leads to a proportionate increase in the firm's output by more than k

Front 21

diseconomies of scale (in terms of long-run total cost)

Back 21

region of the long-run total cost curve along which the percentage change in total cost is greater than the percentage change in output

Front 22

diseconomies of scale (in terms of the production function)

Back 22

equal proportionate increase in all the firm's inputs by an amount k leads to a proportionate increase in firm's outputs by less than k

Front 23

constant returns to scale (in terms of long-run total cost)

Back 23

region of the long-run total cost curve along which the percentage change in total cost is equal to the percentage change in output

Front 24

constant returns to scale (in terms of the production function)

Back 24

equal proportionate increase in all the firm's inputs by an amount k leads to a proportionate increase in the firm's output equal to k

Front 25

factor indivisibility

Back 25

inability to use a fraction of a particular factor of production, as when a self-employed catering service owner has to use at least one truck

Front 26

division of labor

Back 26

process by which each task within a firm is defined narrowly and assigned to different people who perform only these specific tasks

Front 27

marketable permit (pollution)

Back 27

government-issued allowance to emit a certain amount of a pollutant that firms can buy and sell