econ chapter 8

question

accounting profit

answer

total revenue - explicit cost

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

implicit costs

answer

opportunity costs for self-owned resources

question

explicit costs

answer

costs that require a firm to spend money

question

marginal physical product (mpp)

answer

sum of total output / sum of Q labor

question

average physical product (app)

answer

total output / Q labor

question

when mpp is maximized

answer

mc is minimized

question

total fixed cost (tfc)

answer

all cost that do not change when output changes. tfc is a constant amount at all q levels

question

total variable cost (tvc)

answer

all costs that do change when output changes. tvc gets bigger as q increases because the firm needs more labor to make more output.

question

total cost (tc)

answer

all costs at a given output level. tc is the sum of tfc and tvc. tc increases as the level of output increases.

question

average fixed cost (afc)

answer

fixed cost (capital cost) per unit of output, afc always falls as q rises since tfc is a constant value.

question

average variable cost (avc)

answer

variable cost (labor cost) per unit of output. avc falls at first, and then rises as q increases.

question

average total cost (atc)

answer

total cost per unit of output. it is the sum of afc and avc. atc falls at first, and then rises as q increases.

question

marginal cost (mc)

answer

change in the firm's tc when it produces another unit of output. also shows change in tvc from an extra unit of output. mc falls at first, and then rises as q increases.

question

tfc=

answer

q x afc
(total cost of all fixed factors of production)

question

tvc=

answer

q x avc
(total cost of all variable factors of production)

question

tc=

answer

tfc + tvc, or q x atc

question

afc=

answer

tfc/q

question

avc=

answer

tvc/q

question

atc=

answer

tc/q, or afc + avc

question

mc=

answer

^tc/^q, or ^tvc/^q (because the only part of tc that changes when q is produced is tvc)

1 of 21

question

accounting profit

answer

total revenue - explicit cost

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

implicit costs

answer

opportunity costs for self-owned resources

question

explicit costs

answer

costs that require a firm to spend money

question

marginal physical product (mpp)

answer

sum of total output / sum of Q labor

question

average physical product (app)

answer

total output / Q labor

question

when mpp is maximized

answer

mc is minimized

question

total fixed cost (tfc)

answer

all cost that do not change when output changes. tfc is a constant amount at all q levels

question

total variable cost (tvc)

answer

all costs that do change when output changes. tvc gets bigger as q increases because the firm needs more labor to make more output.

question

total cost (tc)

answer

all costs at a given output level. tc is the sum of tfc and tvc. tc increases as the level of output increases.

question

average fixed cost (afc)

answer

fixed cost (capital cost) per unit of output, afc always falls as q rises since tfc is a constant value.

question

average variable cost (avc)

answer

variable cost (labor cost) per unit of output. avc falls at first, and then rises as q increases.

question

average total cost (atc)

answer

total cost per unit of output. it is the sum of afc and avc. atc falls at first, and then rises as q increases.

question

marginal cost (mc)

answer

change in the firm's tc when it produces another unit of output. also shows change in tvc from an extra unit of output. mc falls at first, and then rises as q increases.

question

tfc=

answer

q x afc
(total cost of all fixed factors of production)

question

tvc=

answer

q x avc
(total cost of all variable factors of production)

question

tc=

answer

tfc + tvc, or q x atc

question

afc=

answer

tfc/q

question

avc=

answer

tvc/q

question

atc=

answer

tc/q, or afc + avc

question

mc=

answer

^tc/^q, or ^tvc/^q (because the only part of tc that changes when q is produced is tvc)

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econ chapter 8

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