ECON Exam 2: Production

total fixed cost (TFC)+ total variable costs (TVC)

Total cost (TC) equation:

negative

________________ economic profits encourage firms to exit the market

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

variable costs

costs that change with the amount of output produced, increasing as production increases and decreasing as production decreases

fixed costs

costs that dont change with the amount of output produced

variable; fixed

during the long run there are _______ costs and no _________ costs

decreases

if MC<ATC, then ATC _____________

decreases

if MC<AVC, then AVC ______________

unchanged

if MC=ATC, then ATC remains ____________

unchanged

if MC=ATC, then AVC remains ____________

increases

if MC>ATC, then ATC _____________

increases

if MC>AVC, then AVC ______________

explicit/accounting 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"

implicit

self-owned resources and "value of next best profit" and normal profit are ________ costs

marginal cost

the additional cost associated with one more unit of activity. for production, it is the change in total cost due to the production of one or more output

marginal product (MP)

the additional output produced as a result of utilizing 1 more unit of a variable resource (i.e labor capital)

average product (AP)

the average amount of output produced when per unit of a resource employed; total product divided by the number of units a resource employed

economic costs

the cost associated with the use of resources; the sum of implicit+explicit costs

U

the marginal cost curve is ____ shaped

total cost

the sum of fixed and variable costs of production

short run

the time period in which at least one input of production is fixed but other inputs can be changed

total product (TP)

the total amount of output produced within a given amount of resources

implicit

the value of your own labor is a ________ cost

average total cost (ATC)

total cost (TC) divided by the amount of output produced; total cost per unit

economic profit (as a measure)

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