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Mankiw 5th Chapters 13 & 14
Chapter 13: The Costs of Production | Chapter 14: Firms in Competitive Markets
24
Economics
Undergraduate 2
06/10/2010
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Term
accounting profit
 Definition
Total revenue minus total explicit cost.
Term
average fixed cost
 Definition
Fixed cost divided by the quantity of output.
Term
average total cost
 Definition
Total cost divided by the quantity of output.
Term
average variable cost
 Definition
Variable cost divided by the quantity of output.
Term
constant returns to scale
 Definition
The property whereby long-run average total cost stays the same as the quantity of output changes.
Term
diminishing marginal product
 Definition
The property whereby the marginal product of an input declines as the quantity of the input increases.
Term
diseconomies of scale
 Definition
The property whereby long-run average total cost rises as the quantity of output increases.
Term
economic profit
 Definition
Total revenue minus total cost, including both explicit and implicit costs.
Term
economies of scale
 Definition
The property whereby long-run average total cost falls as the quantity of output increases.
Term
efficient scale
 Definition
The quantity of output that minimizes average total cost.
Term
explicit costs
 Definition
Input costs that require an outlay of money by the firm.
Term
fixed costs
 Definition
Costs that do not vary with the quantity of output produced.
Term
implicit costs
 Definition
Input costs that do not require an outlay of money by the firm.
Term
marginal cost
 Definition
The increase in total cost that arises from an extra unit of production.
Term
marginal product
 Definition
The increase in output that arises from an additional unit of input.
Term
production function
 Definition
The relationship between the quantity of inputs used to make a good and the quantity of output of that good.
Term
profit
 Definition
Total revenue minus total cost.
Term
total cost
 Definition
The market value of the inputs a firm uses in production.
Term
total revenue (for firm)
 Definition
The amount a firm receives for the sale of its output.
Term
variable costs
 Definition
Costs that vary with the quantity of output produced.
Term
average revenue
 Definition
Total revenue divided by the quantity sold.
Term
competitive market
 Definition
A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.
Term
marginal revenue
 Definition
The change in total revenue from an additional unit sold.
Term
sunk cost
 Definition
A cost that has already been committed and cannot be recovered.
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