# Microeconomics Ch. 10

The flashcards below were created by user Anonymous on FreezingBlue Flashcards.

1. Short Run
period during which the firm has at least one fixed input. (Time plays no role)
2. Long Run
period during which all of the firm’s inputs are variable. (Time plays no role)
3. Fixed Cost (FC)
a cost that remains constant as output changes. FC= TC-VC or FC= AFC*Q
4. Variable Cost (VC)
a cost that changes as output changes. VC= TC-FC or VC= AVC*Q
5. Total Cost (TC)
the cost of all the inputs a firm uses in production. TC= FC+VC or TC= ATC*Q
6. Implicit Costs
a cost that represents the value of resources (used in productivity) in which no monetary payment is made. (nonmonetary opportunity cost)
7. Explicit Cost
cost that involves spending money
8. Accounting Profit
Total Revenue- Explicit Costs
9. Economic Profit
Total Revenue- Explicit Costs – Implicit Costs
10. Normal Profit
the actual cost that is needed to keep the firm in business. (Economic Profit = 0)
11. Marginal Product of Labor
the additional output a firm produces by employing one more worker. MPL= ΔQ/ΔL
12. Law of Diminishing Returns
the continual addition of one more variable input will eventually cause the marginal production of the variable to decline. (occurs only in short run)
13. Average product of labor
average output per worker. APL=Q/L
14. Average Marginal Rule
when the marginal result is above the average result, then the average rises. When the marginal result is below the average result, then the average decreases.
15. Average fixed cost(AFC)
fixed cost per unit produced. AFC= FC/Q
16. Average Variable Cost (AVC)
Variable cost per unit produced. AVC=VC/Q
17. Average Total Cost (ATC)
total cost of each unit produced, the ATC will intersect the MC at its lowest point. (must be higher than the AVC) ATC=TC/Q or ATC= AVC+AFC
18. Average Variable Cost (AVC)
Variable cost per unit produced. AVC=VC/Q
19. Average Total Cost (ATC)
total cost of each unit produced, the ATC will intersect the MC at its lowest point. (must be higher than the AVC) ATC=TC/Q or ATC= AVC+AFC
20. Marginal Cost
change in a firm’s total cost from producing one additional good or service. MC=ΔTC/ΔQ (Indirectly related to the marginal product, diminishing returns kick in at the minimum of the MC curve)
21. Long run average cost curve (LRAC)
curve showing the lowest cost at which a firm can produce a given output level in the long run
22. Diseconomies of Scale
exist when a firm’s LRAC rises as output increases. (it is not diminishing returns)
23. Constant Returns to Scale
exist when a firm’s LRAC remains constant as output increases
24. Minimum Efficient Scale exist when a firm’s LRAC rises as output increases.
exist when a firm’s LRAC rises as output increases
25. Economies of Scale
exist when a firm’s LRAC decreases as output increases
 Author: Anonymous ID: 11880 Card Set: Microeconomics Ch. 10 Updated: 2010-03-25 00:21:28 Tags: Costs Folders: Description: Definitions and Equations Show Answers: