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Total Revenue
money received from sale of outputs
Total Cost
money to purchase all inputs
Explicit Costs
input costs required by firm, cash
Implicit Costs
input costs not required by firm
Economic Profit
(TR-TC) includes explicit and implicit costs
Accounting Profit
(TR-explicit costs)
Production Function
relationship between quantity of inputs used and quantity of output
Marginal Product
increase in output from additional unit of input
Diminishing Marginal Product
marginal product of input decreases, as quantity of input increases
Fixed Costs
costs that don't vary with the output produced
Variable Costs
costs that vary with the output produced
Average Total Cost
TC/quantity of output
Average Fixed Cost
Fixed Cost/quantity of output
Average Variable Cost
Variable Cost/quantity of output
Marginal Cost
in increase in TC with an extra unit of production = change in TC/change in quantity
Efficient Scale
quantity of output that minimizes ATC
Economies of Scale
long run ATC decreases as quantity of output increases
Diseconomies of Scale
long run ATC increases as the quantity of output increases
Constant Returns to Scale
long run ATC = same as quantity of output changed
Competitive Market
many buyers and many sellers with identical products
Average Revenue
TR/quantity sold
Marginal Revenue
change in TR from an additional unit sold
Firm that is the sole seller of a product without any substitutes
Natural Monopoly
monopoly that arises because a single firm can supply a good or service to a market at a smaller cost than could 2 or more firms