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Micro- Businesses and the Costs of Production

question
economic costs
answer
the payment that must be made to obtain and retain the services of a resource
question

Accounting profit

answer
revenue - explicit costs
question
Explicit Cost
answer
Monetary expenses
question
economic profit
answer
total revenue - explicit costs - implicit costs
question
short run
answer
the period of time during which at least one of a firm's inputs is fixed (not plant)
question
long run
answer
the time period in which all inputs can be varied
question
total product
answer
total output produced by the firm
question
marginal product
answer
the change in total product over the change in labor input
question
average product
answer
the average amount produced by each unit of a variable factor of production (total product/units of labor)
question
law of diminishing returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
question
Fixed costs (TFC)
answer
costs that do not vary with output
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variable costs
answer
costs that do vary with output
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total cost
answer
fixed cost and variable costs
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Average fixed cost
answer
Total fixed cost over quantity
question
average variable cost
answer
total variable cost over quantity
question
average total cost
answer

total(variable and fixed) cost over quantity

question
marginal cost
answer

change in total cost over the change in quantity

question
normal profit
answer
a profit metric that takes into consideration both explicit and implicit costs
question
long run production
answer
Occurs when a firm changes the scale of all the factors of production
question
long run factories
answer
can have unlimited factories
question
Economices of scale
answer
reductions in minimum average cost that come through increase in size or scale of plant and equipment
question
constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
why economies of scale
answer

-labor specialization

-managerial specialization

-efficient capital

-other factors

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diseconomies of scale
answer
the property whereby long-run average total cost rises as the quantity of output increases
question
Why diseconomies of scale?
answer

1. control and coordination problems

2. communication problems

3. worker alienation

4. shirking

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shirking
answer
avoiding work
question
minimum efficient scale
answer
the lowest level of output at which long-run average costs are minimized
question
natural monopoly
answer
long-run costs are minimized when only one firm produces the product
1 of 28
question
economic costs
answer
the payment that must be made to obtain and retain the services of a resource
question

Accounting profit

answer
revenue - explicit costs
question
Explicit Cost
answer
Monetary expenses
question
economic profit
answer
total revenue - explicit costs - implicit costs
question
short run
answer
the period of time during which at least one of a firm's inputs is fixed (not plant)
question
long run
answer
the time period in which all inputs can be varied
question
total product
answer
total output produced by the firm
question
marginal product
answer
the change in total product over the change in labor input
question
average product
answer
the average amount produced by each unit of a variable factor of production (total product/units of labor)
question
law of diminishing returns
answer
the principle that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline
question
Fixed costs (TFC)
answer
costs that do not vary with output
question
variable costs
answer
costs that do vary with output
question
total cost
answer
fixed cost and variable costs
question
Average fixed cost
answer
Total fixed cost over quantity
question
average variable cost
answer
total variable cost over quantity
question
average total cost
answer

total(variable and fixed) cost over quantity

question
marginal cost
answer

change in total cost over the change in quantity

question
normal profit
answer
a profit metric that takes into consideration both explicit and implicit costs
question
long run production
answer
Occurs when a firm changes the scale of all the factors of production
question
long run factories
answer
can have unlimited factories
question
Economices of scale
answer
reductions in minimum average cost that come through increase in size or scale of plant and equipment
question
constant returns to scale
answer
the property whereby long-run average total cost stays the same as the quantity of output changes
question
why economies of scale
answer

-labor specialization

-managerial specialization

-efficient capital

-other factors

question
diseconomies of scale
answer
the property whereby long-run average total cost rises as the quantity of output increases
question
Why diseconomies of scale?
answer

1. control and coordination problems

2. communication problems

3. worker alienation

4. shirking

question
shirking
answer
avoiding work
question
minimum efficient scale
answer
the lowest level of output at which long-run average costs are minimized
question
natural monopoly
answer
long-run costs are minimized when only one firm produces the product
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