Economics - Production
Increasing Marginal Returns
A characteristic of production whereby the marginal product of the next unit of a variable resource utilized is 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
Economies of scale
A condition in which the long-run average total cost of production decreases as production increases
Dis-economies of Scale
A condition in which the long-run average total cost of production increases as production increases
Constant Returns to Scale
A condition in which the long-run average total cost of production remains constant as production increases
Short-Run Average Total Cost Curve
A curve showing the average total cost for different levels of output when at least on input of production is fixed, typically plant capacity
Long-Run Average Total Cost Curve
A curve showing the lowest average total cost possible for any given level of output when all inputs of production are variable
Marginal Product
The additional output produced as a result of utilizing one more unit of a variable resource
Average Product
The average amount of output produced per unit of 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
The extra or additional cost associated with the production of an additional unit of output
Minimum Efficiency Scale
The lowest level of output at which the long-run average total cost is minimized
Average total cost
Total cost divided by the amount of output produced; total cost per unit
Average Fixed Cost
Total fixed cost 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
Total variable cost divided by the amount of output produced; variable cost per unit
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 resources owned by others
Total Cost
The sum of fixed and variable costs of production
Total Product
The total amount of output produced with a given amount of resources
Implicit Costs
The opportunity costs of using own resources; costs for which no monetary payment is explicitly made
