ECON 1030 - Production
Increasing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of a variable resource utilized as a greater than that of the previous variable resource
Diminishing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of a variable resource utilized is less than that of the previous variable resource
Short Run
A period of time in which at least one input of production is fixed
Variable Costs
Costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases
Fixed Costs
Costs that do not change with the amount of output produced
Explicit Costs
Monetary payments made by individuals, firms, and governments for the use of land, labor, capital, and entrepreneurial ability owned by others. Also known as accounting costs
Marginal Product (MP)
The additional output produced as a result of utilizing 1 more unit of a variable resource (i.e., labor or capital)
Average Product (AP)
The average amount of output produced per unit of a resource employed; total product divided by the number of units of a resource employed
Economic Costs
The costs associated with the use of resources; the sum of explicit and implicit costs
Marginal Cost (MC)
The extra or additional cost associated with the production of an additional unit of output
Implicit Costs
The opportunity costs of using owned resources; costs for which no monetary payment is expliclity made
Total Costs
The sum of the fixed and variable costs of production
Total Product (TP)
The total amount of output produced with a given amount of resources
Average Total Cost (ATC)
Total cost (TC) divided by the amount of output produced; total cost per unit
Average Fixed Cost (AFC)
Total fixed cost (TFC) divided by the amount of output produced; fixed cost per unit
Economic Profit
Total revenue minus economic costs, which include both explicit and implicit costs of production
Accounting Profit
Total revenue minus the explicit costs of production
Average Variable Cost (AVC)
Total variable cost (TVC) divided by the amount of output produced; variable cost per unit