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### 30 Cards in this Set

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 The economic goal of a firm is to: Maximize Profits The amount a firm recieves for the sale of its output Total Revenue The market value of the inputs a firm uses in production Total Cost The firms total revenue minus its total cost (TR-TC=?) Profit Includes all the opportunity costs of making its output of goods and services. cost of production input costs that require a direct outlay of money by the firm. explicit costs input costs that do not require an outlay of money by the firm. implicit costs total revenue minus total cost, including both explicit and implicit costs, measured by economists economic profit the firm’s total revenue minus only the firm’s explicit costs, measured by accountants accounting profit When total revenue exceeds both explicit and implicit costs, the firm earns economic profit shows the relationship between quantity of inputs used to make a good and the quantity of output of that good. production function the increase in output that arises from an additional unit of that input marginal product the property whereby the marginal product of an input declines as the quantity of the input increases. diminishing marginal product The relationship between the quantity a firm can produce and its costs determines pricing decisions. total cost curve costs that do not vary with the quantity of output produced fixed costs costs that do vary with the quantity of output produced. variable costs Total Fixed Costs (TFC) + Total Variable Costs (TVC) = ? Total Costs (TC) can be determined by dividing the firm’s costs by the quantity of output it produces and is the cost of each typical unit of product. average costs Fixed Cost / Quantity Average Fixed Cost Variable Cost / Quantity Average Variable Cost Total Cost / Quantity Average Total Cost the increase in total cost that arises from an extra unit of production. change in total cost / change in quantity marginal cost U-shaped curve Average Total Cost curve The bottom of the U-shaped ATC curve occurs at the quantity that minimizes average total cost. This quantity is sometimes called the efficient scale Whenever marginal cost is less than average total cost, average total cost is falling The marginal-cost curve crosses the average-total-cost curve at the efficient scale In the long run, fixed costs become variable costs the property whereby long-run average total cost falls as the quantity of output increases. economies of scale the property whereby long-run average total cost rises as the quantity of output increases. diseconomies of scale the property whereby long-run average total cost stays the same as the quantity of output increases constant returns to scale