# Microeconomics Ch. 10

 Short Run period during which the firm has at least one fixed input. (Time plays no role) Long Run period during which all of the firm’s inputs are variable. (Time plays no role) Fixed Cost (FC) a cost that remains constant as output changes. FC= TC-VC or FC= AFC*Q Variable Cost (VC) a cost that changes as output changes. VC= TC-FC or VC= AVC*Q Total Cost (TC) the cost of all the inputs a firm uses in production. TC= FC+VC or TC= ATC*Q Implicit Costs a cost that represents the value of resources (used in productivity) in which no monetary payment is made. (nonmonetary opportunity cost) Explicit Cost cost that involves spending money Accounting Profit Total Revenue- Explicit Costs Economic Profit Total Revenue- Explicit Costs – Implicit Costs Normal Profit the actual cost that is needed to keep the firm in business. (Economic Profit = 0) Marginal Product of Labor the additional output a firm produces by employing one more worker. MPL= ΔQ/ΔL 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) Average product of labor average output per worker. APL=Q/L 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. Average fixed cost(AFC) fixed cost per unit produced. AFC= FC/Q Average Variable Cost (AVC) Variable cost per unit produced. AVC=VC/Q 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 Average Variable Cost (AVC) Variable cost per unit produced. AVC=VC/Q 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 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) 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 Diseconomies of Scale exist when a firm’s LRAC rises as output increases. (it is not diminishing returns) Constant Returns to Scale exist when a firm’s LRAC remains constant as output increases Minimum Efficient Scale exist when a firm’s LRAC rises as output increases. exist when a firm’s LRAC rises as output increases Economies of Scale exist when a firm’s LRAC decreases as output increases AuthorAnonymous ID11880 Card SetMicroeconomics Ch. 10 DescriptionDefinitions and Equations Updated2010-03-25T00:21:28Z Show Answers