Cost Management and Profit Maximization

These flashcards cover key terminology related to cost management and profit maximization concepts discussed in the lecture notes.

Fixed Costs

Costs that do not change with the level of output produced.

Variable Costs

Costs that vary with the level of output produced.

Average Variable Cost

Total variable costs divided by the quantity of output.

Marginal Cost

The cost of producing one additional unit of output.

Total Cost Equation

Total Cost = Fixed Costs + Variable Costs.

Breakeven Price

The price at which total revenue equals total costs, resulting in zero profit.

Profit Maximization

The process of increasing profit by balancing marginal cost and marginal revenue.

Implicit Costs

Costs that represent the opportunity costs of using resources owned by the firm.

Economic Profit

Total revenue minus total costs, including implicit and explicit costs.

Accounting Profit

Total revenue minus explicit costs only.

U-shaped Cost Curve

A graphical representation showing the relationship between average total cost and output.

Returns to Scale

The rate at which output increases as all inputs are increased.