Econ 105 the cost of production notes

Because economic profit includes both explicit and implicit costs ....

- accounting profit is larger than economic profit

Explicit costs are ...

- costs that include just about everything we typically think of as a cost - costs that require a firm to spend money

The marginal cost is the (blank) cost that will be incurred by producing one additional unit of (blank)

1. Additional 2. Output

When the (blank) product crosses the (blank) product curve the average product curve starts to decrease

1. Marginal 2. average

Blank)profit is total revenue minus explicit costs

Accounting profit

Suppose jump high produces trampolines ina tented apacebusing purchased frames and materials. They also hire laborer and buy advertising services from a marketing company for a flat annual fee

Advertising and rent

.... product of labor is the units of output produced per worker

Average product

If a small firm finds that operating on a larger scale causes its average cost to stay the same the firm is facing ...

Constant returns to scale

Variable costs ...

Depend on the quantity of output produced

If a small firm finds that operating in a larger scale causes its average cost to increase, the firm is facing

Diseconomies of scale

Blank is the total revenue minus all opportunity costs

Economic profit

In general which is smaller than the other economic or accounting

Economic profit is smaller than accounting profit

Firms have both explicit and implicit costs. Accounting profit is total revenue minus

Explicit costs

Rent on a building, employee salaries, materials and machines are examples of ....

Explicit costs

Explicit costs include

Fixed and variable costs

Costs that don't change as output increases or decreases are called

Fixed costs

If you use your saved money as your start up capital there is an implicit cost because you.....

Give up interest you could have earned on the money in a savings account

......... costs represent forgone aopportunieties

Implicit

The slope of the total cost curve (blank) because of the principle of diminishing marginal product

Increases

Suppose drink well produces flavored water in a permantly rented space using their private well purchased bottles and hired hourly labor. They buy advertising services from a marketing company for the flat annual feel, there variable costs include :

Labor, water, and bottles

One cost faced by nearly all firms is the (blank) cost of the money invested in starting up the business

Opportunity

When economists think about a firms costs they are thinkin about

Opportunity costs

Economic profit is total revenue minus all explicit and ....... costs

Opportunty costs

Economists assume that a firms objective is to maximize

Profits

The amount that a firm receives from the sale of good ma and service is the total

REVENUE

Marginal product is represented by the (blank) of the total production curve

Slope

A firms total cost is the

Sum of all of its fixed and variable costs

A firms first few employees tend to have increasing marginal product, at some point, the principle of diminishing marginal products kicks in, as a result

The average total cost curve is U-Shapdd

A period in which all inputs can be changed is called

The long run

Economists think of the ( blank) run as being the period of time in which a firm can vary all of its cost.

The long run

Average total cost = (blank) cost/ quantity of output

Total cost

Average variable costs = ...... cost/quantity of output

Variable