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Essentials of Economics (Mankiw)- Chapter 12 Vocabulary
The Costs of Production
20
Economics
Graduate
01/28/2012
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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 cost.
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
economic profit
 Definition
Total revenue minus total cost, including both explicit and implicit costs.
Term
accounting profit
 Definition
Total revenue minus total explicit costs.
Term
production function
 Definition
The relationship between quantity of inputs used to make a good and the quantity of output of that 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 the quantity of the input increases.
Term
fixed costs
 Definition
Costs that do not vary with the quantity of output produced.
Term
variable costs
 Definition
Costs that vary with the quantity of output produced.
Term
average total cost
 Definition
Total cost divided by the quantity of output.
Term
average fixed cost
 Definition
Fixed cost 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.
Term
efficient scale
 Definition
The quantity of output that minimizes average total cost.
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 whereby 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 the same as the quantity of output changes.
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