Create an account
the fall in the value of the firm's capital, and accountants calculate it by using the IRS's rules, which are based on standards set by the Financial Accounting Standards Board
an opportunity cost of a firm using capital that it owns-- measured as the change in the market value of a capital over a given period
an opportunity cost incurred by a firm when it uses a factor of production for which it does not make a direct money payment
Marginal Product (MP)
the change in total product that results from a one-unit increase in the quantity of labor employed.
MP = change in TP/ change in Quantity labor
Increasing Marginal Returns
occur when the marginal product of an additional worker exceeds the marginal product of the previous worker
Decreasing Marginal Returns
when the marginal product of an additional worker is less than the marginal product of the previous worker.
Law of decreasing returns
a firm uses more of a variable factor of production, with a given quantity of fixed factors of production, the marginal product of the variable factor eventually decreases
Total Fixed Cost (TFC)
the cost of the firm's fixed factors of production-- the cost of land, capital, and entrepreneurship
Total Variable Cost (TVC)
the cost of the firm's variable factor of production-- the cost of labor. TFC + TVC
Economics of scale
a condition in which a firm increases its plant size and labor employed by the same %, its input increases by a larger % and its ATC decreases
Diseconomies of Scale
a condition in which, when a firm increases its plant size and labor employed by the same %, its output increases by a smaller % and its ATC increases
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