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Econ. production costs
vocab
16
Marketing
12th Grade
10/19/2008

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Term

implicit costs

Definition
(opportunity costs) Internal costs that the entrpreneur gives upt o start a business.
Term
explicit costs
Definition
money used to buy land, labor, capitol
Term
accounting profit
Definition
total revenue - explicit costs
Term
economic profit
Definition

total revenue - (explicit + implicit costs)

 

this is what draws entrepreneurs to an industry

Term
normal profit
Definition

zero economic profit

total revenue covers all explicit costs, implicit costs

Term
production function
Definition
quantity of inputs it takes to prduce a certain amount of output.
Term
short run
Definition
production period where at least one input is fixed (usually factory size)
Term
long run
Definition
production period where all inputs are variable
Term

marginal product

Definition
additional product produced when I add one more unit of input (usually labor)
Term
diminishing marginal product
Definition

As you  hire more units of a variable input (usually labor) the marginal productivity goes up, but after a while goes down

 

(i.e. you make dinner by yourself, then a few cousins come over and help it is better. If the whole family arrives there are too many, production goes down)

Term
fixed costs
Definition
costs that do not change witht he level of production
Term
variable costs
Definition

costs that chane with the level of production.

 

i.e. electricity bill, chocolate chips (in a cookie factory)

Term
total costs
Definition

fixed costs + variable costs

 

ATC = total cost/quantity produced

Term
marginal costs
Definition
additional cost of producing one more unit
Term

marginal revenue

 

Definition
additional revenue of selling one more unit
Term
profit maximization
Definition
marginal cost = marginal revenue
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