ECO201 CH.11

Long Run

The time period after all exit or entry has occurred

Short Run

The time period before exit or entry can occur

Sunk cost

A cost that cannot be recovered. Sunk costs are never relevant because they cannot be change by any choice

Fixed Cost

A cost that does not vary with the quantity of output produced

Explicit cost

A cost that requires a money outlay

Implicit cost

A cost that does not require an outlay of money; opportunity cost

Accounting 𝞹 =

Revenue - Explicit Cost

Economic 𝞹 =

Explicit cost - Implicit cost

Variable costs

Costs that vary with output

Profit = 𝞹 = ?

Total Revenue - Total Cost

Marginal Revenue (MR)

The change in total revenue from selling an additional unit

MR =

ΔTR/ΔQ

Marginal Cost (MC)

The change in total cost from selling an additional unit

MC =

ΔTC/ΔQ

Average cost of Production

The cost per unit, or the total cost of producing Q units divided by Q

AC =

TC/Q

𝞹 can also equal?

(P-AC) x Q