# Production, Costs, Revenues and Profits

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What is the long run?
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Terms in this set (76)
What is the long run?
The period of time in which all factors of production are variable
What is the short run?
The period of time in which at least one factor of production is fixed
What is the most commonly fixed factor in the short run?
Capital
What is product?
Output
What is productivity?
Output per unit of input
What is average product?
Output per unit of input
What is marginal product?
What is the law of diminishing marginal productivity
As one factor of production is increased, the additional input produced by the last output will eventually begin to fall
Why is total product maximised a marginal product crosses zero?
If MP is above zero, TP is rising. If MP is below zero, TP is falling. So when MP crosses zero, TP stops rising and starts falling.
Why does MP=AP at AP's turning point?
When MP>AP, it pulls the average up. When AP>MP, it pulls the average down. When MP=AP, we have a turning point.
What are fixed costs?
Costs which do not vary with the level of output
What are sunk costs?
An irretrievable cost which cannot be recovered if a firm leaves the market
What are variable costs?
Costs which depend on the level of output produced
What are total costs?
The sum of (total) fixed costs and (total) variable costs
What are total variable costs?
Average variable cost x quantity