# Shared Flashcard Set

## Details

Ch. 13 The Costs of Production
exam 2
27
Economics
03/15/2011

Term
 total revenue
Definition
 the amount a firm receives for the sale of its output
Term
 total cost
Definition
 the market value of the inputs a firm uses in production
Term
 profit
Definition
 total revenue minus total costs
Term
 explicit costs
Definition
 input costs that require an outlay of money by the firm
Term
 implicit costs
Definition
 input costs that do not require an outlay of money by the firm
Term
 ecnomic profit
Definition
 total revenue minus total cost, including both explicit and implicit costs
Term
 accounting profit
Definition
 total revenue minus total explicit cost
Term
 production fuction
Definition
 the relationship between quantity of inputs used to make a good and the quantity of output of that good
Term
 production function
Definition
 the relationship betweent eh quantity of inputs used and the quantity of outputs used to make a good
Term
 marginal product
Definition
 the increase in output that arises from an additional unit of input
Term
 diminishing marginal product
Definition
 the property whereby the marginal product of an input declines as teh quatity of the input increases
Term
 total cost curve
Definition
 - the relationship between quantity produced and total costs - gets steeper as the quantity of output increases because of diminishing marginal product
Term
 fixed cost
Definition
 costs that do not vary with the quantity of output produced
Term
 variable costs
Definition
 costs that do vary with the quantity of output produced
Term
 average total costs
Definition
 - total cost divided by the quantity of output - the sum of average fixed cost and average variable cost
Term
 average fixed cost
Definition
 fixed costs divided by the quantity of output
Term
 average variable cost
Definition
 variable cost divided by the quantity of output
Term
 marginal cost
Definition
 - the increase in total cost that arises from an extra unit of production - MC = Change in total cost / change in quantity
Term
 Rising Marginal Cost
Definition
 - marginal costs rises with the quantity of output produced (hence property of diminishing marginal product) - when quantity of a product produced is high, the marginal product of an extra unit of labor is low,a nd marginal cost of an extra unit of output is large
Term
 U-shaped average total cost
Definition
 the bottom of the U-shape occurs at the quantity that minimizes average total cost
Term
 The Relationship between Marginal Cost and Average Total Cost
Definition
 - whenever marginal cost is less than average total cost, ATC is falling. whenever MC is greater than ATC, ATC is rising. - the MC curve crosses the ATC curve at its minimum
Term
 economies of scale
Definition
 the property whereby long-run average total cost falls as the quantity of output increases
Term
 diseconomies of scale
Definition
 the property wehreby long run average total cost rises as the quantity of output increases
Term
 constant returns to scale
Definition
 the property whereby long run average total cost stays teh same as the quantity of output changes
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