Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
29 Cards in this Set
- Front
- Back
|
Explicit Cost |
A cost paid in money |
|
|
Implicit Cost |
an opportunity cost incurred by a firm when it uses a factor of production for which it does not make a direct money payment |
|
|
Economic depreciation |
An opportunity cost of a firm using capital that it owns- measured as the change in the market value of capital over a given period |
|
|
Normal Profit |
the return to entrepreneurship. Normal profit is part of a firms opportunity cost because it is the cost of not running another firm |
|
|
Economic Profit |
A firms total revenue minus total cost |
|
|
short run |
the time frame in which the quantities of some resources are fixed. in the short run, a firm can usually change the quality of labor it uses but not its technology and quantity of capital. |
|
|
long run |
the time frame in which the quantities of all resources can be varied |
|
|
total product |
the total quantity of a good produced in a given period |
|
|
Marginal Product |
the change in total product that results from a one-unit increase in the quantity of labor employed |
|
|
increasing marginal returns |
when the marginal product of an additional worker exceeds the marginal product of the previous worker |
|
|
Decreasing Marginal Returns |
When the marginal product of an additional worker is less than the marginal product of the previous worker. |
|
|
Average Product |
Total product divided by the quantity of a factor of production. The average product of labor is total product divided by the quantity of labor employed. |
|
|
Law of Decreasing Returns |
As a firm uses more of a variable factor of production, with a given quantity of fixed factors of production, the marginal product of the variable factor eventually decreases. |
|
|
Total cost |
The cost of all the factors of production used by a firm. |
|
|
Total Fixed Cost |
the cost of the firms fixed factors of production- the cost of land, capital, and entrepreneurship. |
|
|
Total Variable Cost |
The cost of the firms variable factor of production- the cost of labor |
|
|
Marginal Cost |
The change in total cost that results in one-unit increase in output |
|
|
Average Fixed Cost |
Total fixed cost per unit of output |
|
|
Average variable Cost |
Total variable cost per unit of output. |
|
|
Average Total Cost |
Total cost per unit of output, which equals average fixed cost plus average variable cost. |
|
|
Economies of Scale |
Features of a firms technology that make average total cost fall as output increases. |
|
|
Diseconomies of Scale |
Features of a firms technology that make average total cost rise as output increases |
|
|
Constant returns to scale |
Features of a firms technology that keep average total cost constant as output increases |
|
|
Long-run average cost curve |
A curve that shows the lowest average total cost at which it is possible to produce each output when the firm has had sufficient time to change both its plant size and labor employed. |
|
|
What is a firms REAL goal?
|
To maximize profit
|
|
|
How do you calculate a firms profit?
|
Determine its total revenue and total cost
|
|
|
opportunity cost
|
the highest-valued alternative forgone; cost of the factors of production it employs |
|
|
foregone wages
|
money that would have been made doing something else; under implicit cost
|
|
|
Fixed factors in production
|
equipment, management organization, buildings
|
