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
