rational producer behaviour

rational behaviour

firms always maximise their profits

economic costs

explicit costs + implicit(opportunity) cost

explicit costs

expenses that require direct payment e.g rent

implicit costs

opportunity cost of spending money in an area e.g money spent on rent could be spent on advertising

short run costs

expenses during the time period where at least 1 FOP is fixed

total costs

aggregate spent on producing a certain level of output
TC=FC+VC

marginal cost

addition to total cost of producing another unit of output

average cost

total cost of production per unit

total revenue

aggregate earnings gained by a firm from the sale of a particular quantity of output

average revenue

total revenue received divided by number of units sold

marginal revenue

extra revenue received per additional unit of output sold

profit

revenue>costs

normal profit

revenue needed to cover total costs of production, including opportunity costs AR=AC

abnormal profit

profit level greater than that required for a firm to continue supplying its good or service AR>AC

subnormal profit

profit level lower than that required for a firm to continue supplying its good or service AR

profit maximising level of output

level of output where marginal revenue = marginal cost

corporate social responsibility

when a firm includes public interest in decisions

satisficing

aiming to make enough to continue firm's operations as well as achieving personal goals

growth

aiming to expand the firm

revenue maximisation

to earn as much as possible