Econ Chapter 7 Costs

Economists include

both implicit and explicit costs

Economic profit is typically

lower than accounting profit

Accountants will include

only explicit costs

One thing that distinguishes the short run from the long run is

the existence of at least one fixed input

Can accounting profit be positive while economic profits are negative?

Yes, if total revenue covers explicit costs but not opportunity costs.

Law of diminishing returns

as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will first increase, then eventually decrease.

The long run is best defined as a time period

during which all inputs can be varied

The marginal cost curve often decreases at first and then starts to increase. This is explained by:

law of diminishing returns

The law of diminishing returns only applies in case where

there is at least one fixed factor of production

A firm's _________ costs are costs that increase as quantity produced increases. These costs oven show the _______ illustrated by increasing steeper slope of the total cost curve

variable ; diminishing marginal returns