Ch6

The difference between a firm’s total revenue and its explicit costs

Any force that prevents firms from entering a new market.

• Any durable goods (buildings, machinery, tools) produced by other
• factors of production for use in a production process. Any durable
• inputs to the production process, such as tools, machinery, and
• buildings.

A situation in which long-run average cost does not change as scale changes.

A situation in which long-run average cost increases as a firm’s output increases.

The difference between a firm’s total revenue and the sum of its explicit and implicit costs.

An economic profit that is less than zero.

That part of the payment for a factor of production that exceeds the owner’s reservation price, the price below which the owner would not supply the factor.

A situation in which long-run average cost decreases as a firm’s output increases.

The actual payments a firm makes to its factors of production and other suppliers.

An organization that combines factors of production to produce a good or service or some combination of goods and services.

All the firm’s opportunity costs of the resources supplied by the firm’s owners.

The cost of an indivisible factor of production.

A factor of production that must be available in some minimum amount if a productive activity, even of minimal size, is to occur at all.

The lowest cost per unit that can be achieved for a given level of output when all factors of production, all costs, and the size of the firm are variable, but technology is constant.

The smallest quantity of output that will achieve minimum long-run average cost.

The opportunity cost of the resources supplied by the firm’s owners; normal profit = accounting profit - economic profit.

the size of a firm relative to other possible sizes of firms serving a particular market