# Shared Flashcard Set

## Details

Economics- Ch 13
N/a
15
Economics
Not Applicable
11/08/2011

Term
 Profit = Total revenue – Total cost
Definition
 Total revenue-the amount a firm receives from the sale of its outputTotal cost- the market value of the inputs a firm uses in production
Term
 Explicit costs
Definition
 require an outlay of money, e.g., paying wages to workers
Term
 Implicit costs
Definition
 do not require a cash outlay, e.g., the opportunity cost of the owner’s time.
Term
 Accounting profit
Definition
 total revenue minus total explicit costs
Term
 Economic profit
Definition
 total revenue minus total costs (including explicit and implicit costs)
Term
 what is a production function?
Definition
 A production function shows the relationship between the quantity of inputs used to produce a good and the quantity of output of that good
Term
 The marginal product of any input is...
Definition
 the increase in output arising from an additional unit of that input, holding all other inputs constant. Examples: ΔQ = change in output ΔL = change in laborMarginal product of labor (MPL)=change in output/change in labor
Term
 Diminishing marginal product:
Definition
 the marginal product of an input declines as the quantity of the input increases (other things equal)
Term
 EXAMPLE 1: Farmer Jack’s Costs -Farmer Jack must pay \$1000 per month for the land, regardless of how much wheat he grows. -The market wage for a farm worker is \$2000 per month. -So Farmer Jack’s costs are related to how much wheat he produces…... Is an example of?
Definition
 Diminishing marginal product
Term
 Marginal Cost (MC) is the...
Definition
 increase in Total Cost from producing one more unit: MC= ΔTC/ΔQ
Term
 Fixed costs (FC)...
Definition
 do not vary with the quantity of output produced. -For Farmer Jack, FC = \$1000 for his land -Other examples: cost of equipment, loan payments, rent
Term
 Variable costs (VC) vary with what?
Definition
 the quantity produced. -For Farmer Jack, VC = wages he pays workers -Other example: cost of materials Total cost (TC) = FC + VC
Term
 Average total cost (ATC)
Definition
 equals total cost divided by the quantity of output: ATC = TC/Q Also, ATC = AFC + AVC
Term
 Some inputs are fixed (e.g., factories, land). The costs of these inputs are FC.
Definition
 Short run:
Term
 All inputs are variable (e.g., firms can build more factories, or sell existing ones).
Definition
 Long run:
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