Econ ch. 12
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21 terms
Terms | Definitions |
|---|---|
 Economics: Industrial Organization | The study of how firms' decisions about prices and quantities depend on the market conditions they face |
| Total Revenue | The amount a firm receives for the sale of its output |
| Total Cost | The market value of the inputs a firm uses in production |
| Profit | Total revenue minus total cost |
| Explicit Costs | Input costs that require an outlay of money by the firm (e.g. rent) |
| Implicit Costs | Input costs that do not require an outlay of money by the firm (e.g. interest forgone on money used) |
| Economic Profit | Total revenue minus total cost, including both explicit and implicit costs |
| Accounting Profit | Total revenue minus total explicit cost |
| Production Function | The relationship between quantity of inputs used to make a good and the quantity of output of that good |
| Marginal Product | The increase in output that arises from an additional unit of input |
| Diminishing Marginal Product | The property Whereby the marginal product of an input declines as the quantity of the input increases |
| Fixed Costs | Costs that do not vary with the quantity of output produced |
| Variable Costs | Costs that do vary with the quantity of output produced |
| Average Total Cost | ATC = TC/Q |
| Average Fixed Cost | AFC = FC/Q |
| Average Variable Cost | AVC = VC/Q |
| Marginal Cost | Change in total cost/Change in quantity |
| Efficient Scale | The quantity of output that minimizes average total cost |
| Economies of Scale | The property whereby long-run average total cost falls as the quantity of output increases (left-most downward sloping part of the long-run ATC) |
| Diseconomies of Scale | The property whereby long-run average total cost rises as the quantity of output increases (right-most upward sloping part of the long-run ATC) |
| Constant Returns to Scale | The property whereby long-run average total cost stays the same as the quantity of output changes (middle flat part of the long-run ATC) |
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