Econ Ch. 12 The Costs of Production

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Total Revenue
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Terms in this set (21)
-input costs that do not require outlay of money by firm
-opportunity cost
-Let say Caroline is skilled with computers- she can $100 by working with programming. for every hour she works at her cookie shop, she gives up $100 for income
-opportunity cost of financial capital that has been invested in a business
Diminishing Marginal Product-as # of workers increases, the marginal product declines -the property whereby marginal product of input declines as the quantity of the input increases -there are more workers taking up space in kitchen, getting in each others way, therefore each additional worker can contribute fewer cookiesFixed Costs-costs that do not vary with the quantity of output produced -incurred even if firm produces nothing at all -how much rent someone pays to rent place to run buisness-cost does not change to rent -how much someone pays a bookkeeper to keep track of what's produced-his salary does not changeVariable Costs-Costs that vary with quantity of output produced -cost of coffee beans, milk, sugar, paper cups if you are producing coffee -salaries of worker who produce coffeeAverage Total Costs-total divided by the quantity of output -because total cost is the sum of fixed and variable cost, average total cost can be expressed as sum of average fixed cost and average variable cost -tells us the cost of a typical unitAverage Fixed Cost-fixed cost divided by quantity of outputAverage Variable Cost-variable cost divided by quantity of outputMarginal Cost-amount total cost rises when firm increases production by 1 unit of output -the increase in total cost that arises from an extra unit of production -change in total cost divided by change in quantity -rises as quantity of output produced increasesEfficient Scale-the quantity of output that minimizes average total costs -EX: scale is 5-6 cups at coffee factory. if it falls or rises, average total cost rises -levels of output are balanced to yield lowest average total costEconomies of Scale-the property whereby long-run average total cost falls as the quantity of output increasesDiseconomies of Scale-the property whereby the long-run average total cost rises as the quantity of output increasesConstant returns to Scale-the property whereby the long-run average total cost stays the same as the quantity of output changes