Economics: Chap. 13
The Costs of Production
The Costs of Production
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total revenue
amount a firm receives for the sale of its output
total cost
market value of the inputs a firm uses in production
profit
total revenue - (minus) total cost
explicit costs
input costs that require an outlay of money by the firm
implicit costs
input costs that do not require an outlay of money by the firm
economic profit
total revenue - (minus) total cost (including both explicit and implicit costs)
accounting profit
total revenue - (minus) explicit cost
production function
the relationship between quantity of inputs used to make a good and the quantity of output of that good
marginal product
the increase in output that arises from an additional unit of input
diminishing marginal product
the property whereby the marginal product of an input inclines as the quantity of the input increases
fixed costs
costs that do not vary with the quantity of output produced (e.g. rent)
variable costs
costs that vary with the quantity of output produced
