Production Costs - Principles of Microeconomics

These flashcards cover key concepts and vocabulary related to production costs in microeconomics, helping students understand fundamental principles necessary for their exam.

Production costs

The expenses incurred by a firm in the production of goods or services.

Total revenue

The total amount of money a firm receives from sales of its output.

Total cost

The market value of all inputs used in the production process.

Profit

Total revenue minus total cost.

Opportunity cost

The cost of something is what you give up to get it.

Explicit costs

Input costs that require an outlay of money by the firm.

Implicit costs

Costs that do not require an outlay of money by the firm, often involving foregone opportunities.

Marginal product

The increase in output from an additional unit of input.

Diminishing marginal product

The decrease in the marginal product of an input as the quantity of the input increases.

Fixed costs

Costs that do not vary with the quantity of output produced.

Variable costs

Costs that vary with the quantity of output produced.

Average total cost (ATC)

Total cost divided by the quantity of output.

Economies of scale

The property where average total cost decreases as the quantity of output increases.

Diseconomies of scale

The property where average total cost increases as the quantity of output increases.

Efficient scale

The quantity of output that minimizes average total cost.

Marginal cost (MC)

The increase in total cost that arises from producing one additional unit of output.

Total-cost curve

A graphical representation of total costs in relation to the quantity of output.

Short run

A period where some inputs are fixed and cannot be changed.

Long run

A period where all inputs can be varied.

Production function

The relationship between quantity of inputs used and the quantity of output produced.