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Microeconomics Ch. 10

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  1. Short Run
    period during which the firm has at least one fixed input. (Time plays no role)
  2. Long Run
    period during which all of the firm’s inputs are variable. (Time plays no role)
  3. Fixed Cost (FC)
    a cost that remains constant as output changes. FC= TC-VC or FC= AFC*Q
  4. Variable Cost (VC)
    a cost that changes as output changes. VC= TC-FC or VC= AVC*Q
  5. Total Cost (TC)
    the cost of all the inputs a firm uses in production. TC= FC+VC or TC= ATC*Q
  6. Implicit Costs
    a cost that represents the value of resources (used in productivity) in which no monetary payment is made. (nonmonetary opportunity cost)
  7. Explicit Cost
    cost that involves spending money
  8. Accounting Profit
    Total Revenue- Explicit Costs
  9. Economic Profit
    Total Revenue- Explicit Costs – Implicit Costs
  10. Normal Profit
    the actual cost that is needed to keep the firm in business. (Economic Profit = 0)
  11. Marginal Product of Labor
    the additional output a firm produces by employing one more worker. MPL= ΔQ/ΔL
  12. Law of Diminishing Returns
    the continual addition of one more variable input will eventually cause the marginal production of the variable to decline. (occurs only in short run)
  13. Average product of labor
    average output per worker. APL=Q/L
  14. Average Marginal Rule
    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.
  15. Average fixed cost(AFC)
    fixed cost per unit produced. AFC= FC/Q
  16. Average Variable Cost (AVC)
    Variable cost per unit produced. AVC=VC/Q
  17. Average Total Cost (ATC)
    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
  18. Average Variable Cost (AVC)
    Variable cost per unit produced. AVC=VC/Q
  19. Average Total Cost (ATC)
    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
  20. Marginal Cost
    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)
  21. Long run average cost curve (LRAC)
    curve showing the lowest cost at which a firm can produce a given output level in the long run
  22. Diseconomies of Scale
    exist when a firm’s LRAC rises as output increases. (it is not diminishing returns)
  23. Constant Returns to Scale
    exist when a firm’s LRAC remains constant as output increases
  24. Minimum Efficient Scale exist when a firm’s LRAC rises as output increases.
    exist when a firm’s LRAC rises as output increases
  25. Economies of Scale
    exist when a firm’s LRAC decreases as output increases
Author
Anonymous
ID
11880
Card Set
Microeconomics Ch. 10
Description
Definitions and Equations
Updated
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