Chapter 7- Production & Cost in the Firm - Custom Scholars
Home » Flash Cards » Chapter 7- Production & Cost in the Firm

# Chapter 7- Production & Cost in the Firm

question
Explicit Cost
opportunity cost of resources employed by a firm that takes the form of cash payments (wages, rent, insurance, taxes, etc.)
question
Implicit Cost
a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment (use of company owned building, owner's time)
question
Accounting Profit
A firm's total revenue minus its explicit costs
question
Economic Profit
total revenue minus total cost, including both explicit and implicit costs
question
Normal Profit
a firm's accounting profit when all resources earn their opportunity cost; accounting profit equals implicit cost
question
Variable Resources
any resource that can be varied in the short run to increase or decrease production (labor)
question
Fixed Resource
any resource that cannot be varied in the short-run (size of building)
question
Short Run
a period during which at least one of the firm's resources is fixed
question
Long Run
a period during which all resources under the firm's control are variable
question
Total Product
a firm's total output per period
question
Production Function
the relationship between resources employed and a firm's total product
question
Marginal Product
the change in total product when a particular resource increases by 1 unit, all other resources constant
question
Increasing Marginal Returns
the marginal product of a variable resource increases as each additional unit of that resource is employed
question
Law of Diminishing Marginal Returns
as more of a variable resource is added to a given amount of other resources, marginal product eventually declines and could become negative
question
Fixed Cost
any production cost that is independent of the firm's rate of output- doesn't vary with output
question
Variable Cost
any production cost that changes as the rate of output changes
question
Total Cost
the sum of fixed cost and variable cost, or TC= FC + VC
question
Marginal Cost
the change in total cost resulting from a one-unit change in output; the change in total cost divided by the change in output
MC= change in TC/ change in q
question
When marginal returns increase...
marginal cost of output falls
question
When firm experiences diminishing marginal returns...
marginal cost of output increases
question
Total Cost Curve
sums fixed and variable, variable cost curve shifted vertically by fixed cost
question
Average Variable Cost
variable cost divided by output
AVC= VC/q
question
Average Total Cost
total cost divided by output, or sum of avg. fixed cost and avg. variable cost
ATC= TC/q
ATC= AFC + AVC
question
When marginal cost is above average cost...
the average cost goes up
question
Economies of Scale
forces that reduce a firm's average cost as the scale of operation expands in the long run
question
Diseconomies of scale
forces that may eventually increase a firm's average cost as the scale of operation increases in the long run
question
Long-run Average Cost Curve
a curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve
question
Constant Long-Run Average Cost
a condition that occurs if, over some range of output, long-run avg. cost neither increases nor decreases with changes in firm size
question
Minimum Efficient Scale
The lowest rate of output at which a firm takes full advantage of economies of scale
question
The slope of total product of labor is...
the same as the marginal product of labor curve
MPl= change in output/change in labor
question
Output can only be changed...
in the short run by adjusting variable resources
1 of 31
question
Explicit Cost
opportunity cost of resources employed by a firm that takes the form of cash payments (wages, rent, insurance, taxes, etc.)
question
Implicit Cost
a firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment (use of company owned building, owner's time)
question
Accounting Profit
A firm's total revenue minus its explicit costs
question
Economic Profit
total revenue minus total cost, including both explicit and implicit costs
question
Normal Profit
a firm's accounting profit when all resources earn their opportunity cost; accounting profit equals implicit cost
question
Variable Resources
any resource that can be varied in the short run to increase or decrease production (labor)
question
Fixed Resource
any resource that cannot be varied in the short-run (size of building)
question
Short Run
a period during which at least one of the firm's resources is fixed
question
Long Run
a period during which all resources under the firm's control are variable
question
Total Product
a firm's total output per period
question
Production Function
the relationship between resources employed and a firm's total product
question
Marginal Product
the change in total product when a particular resource increases by 1 unit, all other resources constant
question
Increasing Marginal Returns
the marginal product of a variable resource increases as each additional unit of that resource is employed
question
Law of Diminishing Marginal Returns
as more of a variable resource is added to a given amount of other resources, marginal product eventually declines and could become negative
question
Fixed Cost
any production cost that is independent of the firm's rate of output- doesn't vary with output
question
Variable Cost
any production cost that changes as the rate of output changes
question
Total Cost
the sum of fixed cost and variable cost, or TC= FC + VC
question
Marginal Cost
the change in total cost resulting from a one-unit change in output; the change in total cost divided by the change in output
MC= change in TC/ change in q
question
When marginal returns increase...
marginal cost of output falls
question
When firm experiences diminishing marginal returns...
marginal cost of output increases
question
Total Cost Curve
sums fixed and variable, variable cost curve shifted vertically by fixed cost
question
Average Variable Cost
variable cost divided by output
AVC= VC/q
question
Average Total Cost
total cost divided by output, or sum of avg. fixed cost and avg. variable cost
ATC= TC/q
ATC= AFC + AVC
question
When marginal cost is above average cost...
the average cost goes up
question
Economies of Scale
forces that reduce a firm's average cost as the scale of operation expands in the long run
question
Diseconomies of scale
forces that may eventually increase a firm's average cost as the scale of operation increases in the long run
question
Long-run Average Cost Curve
a curve that indicates the lowest average cost of production at each rate of output when the size, or scale, of the firm varies; also called the planning curve
question
Constant Long-Run Average Cost
a condition that occurs if, over some range of output, long-run avg. cost neither increases nor decreases with changes in firm size
question
Minimum Efficient Scale
The lowest rate of output at which a firm takes full advantage of economies of scale
question
The slope of total product of labor is...
the same as the marginal product of labor curve
MPl= change in output/change in labor
question
Output can only be changed...
in the short run by adjusting variable resources

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

## Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.