Microeconomics

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Production/Cost/Short-Run/Long-Run

Total Revenue

money received from sale of outputs

Total Cost

money to purchase all inputs

Profit

TR-TC

Explicit Costs

input costs required by firm, cash

Implicit Costs

input costs not required by firm

Economic Profit

(TR-TC) includes explicit and implicit costs

Accounting Profit

(TR-explicit costs)

Production Function

relationship between quantity of inputs used and quantity of output

Marginal Product

increase in output from additional unit of input

Diminishing Marginal Product

marginal product of input decreases, as quantity of input increases

Fixed Costs

costs that don't vary with the output produced

Variable Costs

costs that vary with the output produced

Average Total Cost

TC/quantity of output

Average Fixed Cost

Fixed Cost/quantity of output

Average Variable Cost

Variable Cost/quantity of output

Marginal Cost

in increase in TC with an extra unit of production = change in TC/change in quantity

Efficient Scale

quantity of output that minimizes ATC

Economies of Scale

long run ATC decreases as quantity of output increases

Diseconomies of Scale

long run ATC increases as the quantity of output increases

Constant Returns to Scale

long run ATC = same as quantity of output changed

Competitive Market

many buyers and many sellers with identical products

Average Revenue

TR/quantity sold

Marginal Revenue

change in TR from an additional unit sold

Monopoly

Firm that is the sole seller of a product without any substitutes

Natural Monopoly

monopoly that arises because a single firm can supply a good or service to a market at a smaller cost than could 2 or more firms

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