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30 Cards in this Set
- Front
- Back
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Explicit Costs |
Direct payment of cash |
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Implicit Costs |
Represents the inflows of cash that are forgone |
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Economic Profit |
Takes into account implicit costs and cost of capital |
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Implicit Cost of Capital |
Amount you could get if you sold something |
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Accounting Profit |
TR-EC Emphasis on Implicit Costs |
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Normal Profit |
An economic profit is equal to zero |
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Optimal Output Rule |
When quantity at which marginal revenue equals marginal costs |
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Marginal Revenue Curve |
Shows marginal revenue for each unit |
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Marginal Cost Curve |
Marginal Cost for Each unit |
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Principle of Marginal Analysis |
Every activity should continue until marginal benefit equals marginal cost |
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Production of function |
Relationship between inputs and output |
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Short run |
Fixed input cannot be varied but the quantity of variable input can |
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Long run |
Quantities of all inputs can be varied |
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Total Product Curve |
How quantity changes as the quantity of the variable input changes |
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Marginal Product |
Increase in output that results from using one more unit of that input |
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Diminishing returns to an input |
Marginal product declines as more input is used |
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Total Cost |
Equal to the sum of fied cost |
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Fixed cost |
does not depend on output |
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Variable Cost |
Does depend on output |
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Average Total Cost |
TC/Q |
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U-SHaped Average Total Cost Curve |
Costs of many average total cost curves |
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Average Fixed Cost |
Falls when output increases |
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Average Variable Cost |
Rises with output |
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Long-Run Average Total Cost Curve |
Relationship between output and average total cost when fixed cost has been chose to minimize total cost when fixed has been chosen to minimize average total cost |
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Returns to scale |
Ouput increasing |
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Constant Returns to Scale |
Flat Spot |
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Sunk Costs |
Expenditures that have already been made and cannot be covered |
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Monopolist |
Producer who is the sole supplier of a good without close substitutions |
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Barrier to Entry |
How easy it is to enter an economy |
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Natural Monopoly |
Control of a natural resource or input |
