Microeconomics Ch. 10

period during which the firm has at least one fixed input. (Time plays no role)

period during which all of the firm’s inputs are variable. (Time plays no role)

a cost that remains constant as output changes. FC= TC-VC or FC= AFC*Q

a cost that changes as output changes. VC= TC-FC or VC= AVC*Q

the cost of all the inputs a firm uses in production. TC= FC+VC or TC= ATC*Q

a cost that represents the value of resources (used in productivity) in which no monetary payment is made. (nonmonetary opportunity cost)

cost that involves spending money

Total Revenue- Explicit Costs

Total Revenue- Explicit Costs – Implicit Costs

the actual cost that is needed to keep the firm in business. (Economic Profit = 0)

the additional output a firm produces by employing one more worker. MPL= ΔQ/ΔL

the continual addition of one more variable input will eventually cause the marginal production of the variable to decline. (occurs only in short run)

average output per worker. APL=Q/L

when the marginal result is above the average result, then the average rises. When the marginal result is below the average result, then the average decreases.

fixed cost per unit produced. AFC= FC/Q

Variable cost per unit produced. AVC=VC/Q

total cost of each unit produced, the ATC will intersect the MC at its lowest point. (must be higher than the AVC) ATC=TC/Q or ATC= AVC+AFC

Variable cost per unit produced. AVC=VC/Q

total cost of each unit produced, the ATC will intersect the MC at its lowest point. (must be higher than the AVC) ATC=TC/Q or ATC= AVC+AFC

change in a firm’s total cost from producing one additional good or service. MC=ΔTC/ΔQ (Indirectly related to the marginal product, diminishing returns kick in at the minimum of the MC curve)

curve showing the lowest cost at which a firm can produce a given output level in the long run

exist when a firm’s LRAC rises as output increases. (it is not diminishing returns)

exist when a firm’s LRAC remains constant as output increases

exist when a firm’s LRAC rises as output increases

exist when a firm’s LRAC decreases as output increases