Cost, Revenue, Product, & Profit Vocabulary - Custom Scholars
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Cost, Revenue, Product, & Profit Vocabulary

question
explicit cost
answer
The monetary payment made by a firm to an outsider to acquire an input
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implicit cost
answer
The income sacrificed by a firm that uses a resource it owns
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economic cost
answer
The sum of explicit and implicit costs, also equal to a firm's total opportunity costs
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total variable cost (TVC)
answer
Costs that vary (change) as output changes; arise from the use of variable inputs
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total fixed cost (TFC)
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Costs that do not change as output changes; arise from the use of fixed inputs
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total cost (TC)
answer
The sum of fixed and variable costs
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average fixed cost (AFC)
answer
Fixed cost per unit of output
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average variable cost (AVC)
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Variable cost per unit of output
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average total cost (ATC)
answer
Total cost per unit of output
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marginal cost (MC)
answer
The change in cost arising from one additional unit of output
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long-run average total cost (LRATC) curve
answer
A curve showing the lowest possible average cost that can be attained for any level of output when all firms inputs are variable
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total product (TP or Q)
answer
The total amount of product (output) produced by a firm
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marginal product (MP)
answer
The additional product produced by one additional unit of variable input
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average product (AP)
answer
Product per unit of variable input
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total revenue (TR)
answer
The total earnings of a firm from the sale of its output
question
marginal revenue (MR)
answer
The additional revenue of a firm arising from the sale of an additional unit of output
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average revenue (AR)
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Revenue per unit of output
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economic profit
answer
Total revenue minus economic costs (or total opportunity costs, or the sum of explicit plus implicit costs)
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normal profit
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The minimum amount of revenue required by a firm so that it will be induced to keep running, which is that part of revenue that covers implicit costs, including entrepreneurship (after all explicit costs have been covered)
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Formula for TC
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TC=TFC + TVC
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Formula for AFC
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AFC=TFC/Q
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Formula for AVC
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AVC=TVC/Q
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Formula for ATC
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ATC=AFC+AVC
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Formula for MC
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MC= change in TC/change in Q = change in TVC/change in Q
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Formula for MP
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MP=change in TP/change in units of variable input
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Formula for AP
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AP=TP/units of variable input
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Formula for TR
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TR=P x Q
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Formula for MR
answer
MR=change in TR/change in Q
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Formula for AR
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AR=TR/Q
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Formula for TFC
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TFC=TC-TVC or AFC x Q
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Formula for TVC
answer
TVC=TC-TFC
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question
explicit cost
answer
The monetary payment made by a firm to an outsider to acquire an input
question
implicit cost
answer
The income sacrificed by a firm that uses a resource it owns
question
economic cost
answer
The sum of explicit and implicit costs, also equal to a firm's total opportunity costs
question
total variable cost (TVC)
answer
Costs that vary (change) as output changes; arise from the use of variable inputs
question
total fixed cost (TFC)
answer
Costs that do not change as output changes; arise from the use of fixed inputs
question
total cost (TC)
answer
The sum of fixed and variable costs
question
average fixed cost (AFC)
answer
Fixed cost per unit of output
question
average variable cost (AVC)
answer
Variable cost per unit of output
question
average total cost (ATC)
answer
Total cost per unit of output
question
marginal cost (MC)
answer
The change in cost arising from one additional unit of output
question
long-run average total cost (LRATC) curve
answer
A curve showing the lowest possible average cost that can be attained for any level of output when all firms inputs are variable
question
total product (TP or Q)
answer
The total amount of product (output) produced by a firm
question
marginal product (MP)
answer
The additional product produced by one additional unit of variable input
question
average product (AP)
answer
Product per unit of variable input
question
total revenue (TR)
answer
The total earnings of a firm from the sale of its output
question
marginal revenue (MR)
answer
The additional revenue of a firm arising from the sale of an additional unit of output
question
average revenue (AR)
answer
Revenue per unit of output
question
economic profit
answer
Total revenue minus economic costs (or total opportunity costs, or the sum of explicit plus implicit costs)
question
normal profit
answer
The minimum amount of revenue required by a firm so that it will be induced to keep running, which is that part of revenue that covers implicit costs, including entrepreneurship (after all explicit costs have been covered)
question
Formula for TC
answer
TC=TFC + TVC
question
Formula for AFC
answer
AFC=TFC/Q
question
Formula for AVC
answer
AVC=TVC/Q
question
Formula for ATC
answer
ATC=AFC+AVC
question
Formula for MC
answer
MC= change in TC/change in Q = change in TVC/change in Q
question
Formula for MP
answer
MP=change in TP/change in units of variable input
question
Formula for AP
answer
AP=TP/units of variable input
question
Formula for TR
answer
TR=P x Q
question
Formula for MR
answer
MR=change in TR/change in Q
question
Formula for AR
answer
AR=TR/Q
question
Formula for TFC
answer
TFC=TC-TVC or AFC x Q
question
Formula for TVC
answer
TVC=TC-TFC
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