Accounting profit are equal to total revenue minus explicit costs.
Average total cost (ATC) is the total cost divided by the total output.
Average variable cost is the total variable cost divided by the total output.
Average fixed cost is the total fixed cost divided by the total output.
Constant returns to scale exist when ATC does not change as the quantity produced changes.
The cost of production is what a firm must pay for its inputs.
Diseconomies of scale occur when ATC rises as the quantity produced increases.
Economic profit are equal to total revenue minus both explicit and implicit costs.
Economies of scale occur when average total cost falls as the quantity produced increases.
Exit is a long-run decision to leave the market.
A firm is any business entity that produces a good or service.
A fixed cost is the cost of fixed factors of production, which a firm must pay even if it produces zero output.
A fixed factor of production is an input that cannot be changed in the short run.
The Law of Diminishing Returns states that successive increases in inputs eventually lead to less additional output.
The long run is a period of time when all of a firm’s inputs can be varied.
Marginal cost is the change in total cost associated with producing one more unit of output.
Marginal product is the change in total output associated with using one more unit of input.
Marginal Revenue is the change in total revenue associated with producing one more unit of output.
Physical Capital is any good, including machines and buildings, used for production.
Production is the process by which the transformation of inputs to outputs occurs.
Producer surplus is the difference between the market price and the marginal cost curve.
The profits of a firm are equal to its revenues minus its costs.
Shutdown is a short-run decision to not produce anything during a specific period.
The short run is a period of time when only some a firm’s inputs can be varied.
Sunk costs are costs, that once committed, can never be recovered and should not affect current and future production decisions.
Revenue is the amount of money the firm brings in from sales of its outputs.
Total cost is the sum of variable and fixed costs.
A variable cost is the cost of variable factors of production, which change along with a firm’s output.
A variable factor of production is an input that can be changed in the short run.