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The difference between a firm’s total revenue and its explicit costs
barrier to entry
Any force that prevents firms from entering a new market.
- Any durable goods (buildings, machinery, tools) produced by other
- factors of production for use in a production process. Any durable
- inputs to the production process, such as tools, machinery, and
constant returns to scale
A situation in which long-run average cost does not change as scale changes.
diseconomies of scale
A situation in which long-run average cost increases as a firm’s output increases.
economic (or excess) profit
The difference between a firm’s total revenue and the sum of its explicit and implicit costs.
An economic profit that is less than zero.
That part of the payment for a factor of production that exceeds the owner’s reservation price, the price below which the owner would not supply the factor.
economies of scale
A situation in which long-run average cost decreases as a firm’s output increases.
The actual payments a firm makes to its factors of production and other suppliers.
An organization that combines factors of production to produce a good or service or some combination of goods and services.
All the firm’s opportunity costs of the resources supplied by the firm’s owners.
The cost of an indivisible factor of production.
invisable factor of production
A factor of production that must be available in some minimum amount if a productive activity, even of minimal size, is to occur at all.
Long run average cost
The lowest cost per unit that can be achieved for a given level of output when all factors of production, all costs, and the size of the firm are variable, but technology is constant.
minimum efficient quantity
The smallest quantity of output that will achieve minimum long-run average cost.
The opportunity cost of the resources supplied by the firm’s owners; normal profit = accounting profit - economic profit.
the size of a firm relative to other possible sizes of firms serving a particular market
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