06_Understanding Business Structures and Costs (micro)

Partnership

A business structure in which two or more individuals share ownership

Company

A business structure with a separate legal existence from its owners

Private Company

A company not listed on a stock exchange and not required to disclose financial information to the public

Public Company

A company listed on a stock exchange and required to disclose financial information to the public

Profit

The difference between total revenue and total cost

Explicit Costs

Costs involving direct payment

Implicit Costs

Costs that do not involve direct payment

Economic Profit

Total revenue minus total cost

Accounting Profit

Total revenue minus total explicit costs

Marginal Product of Labor

The additional output produced by hiring one more unit of labor

Fixed Costs

Costs that do not vary with the level of output

Variable Costs

Costs that change with the level of output

Average Total Cost

The total cost divided by the quantity of output produced

Marginal Cost

The additional cost of producing one more unit of output

Efficient Scale of Production

The output level at which average total cost is minimized