Principles of Microeconomics - Short-Run Costs and Output Decisions

These flashcards cover key concepts and definitions from the lecture notes on short-run costs and output decisions in microeconomics.

Fixed Cost

Any cost that does not depend on the firm’s level of output and is incurred even if the firm is producing nothing.

Variable Cost

A cost that depends on the level of production chosen.

Total Cost (TC)

Total fixed costs plus total variable costs.

Total Fixed Cost (TFC)

The total of all costs that do not change with output, even if output is zero.

Average Fixed Cost (AFC)

Total fixed cost divided by the number of units of output; a per-unit measure of fixed costs.

Spreading Overhead

The process of dividing total fixed costs by more units of output, leading to a decline in average fixed cost.

Total Variable Cost (TVC)

The total of all costs that vary with output in the short run.

Marginal Cost (MC)

The increase in total cost that results from producing one more unit of output.

Average Variable Cost (AVC)

Total variable cost divided by the number of units of output; a per-unit measure of variable costs.

Average Total Cost (ATC)

Total cost divided by the number of units of output; a per-unit measure of total costs.

Profit Maximization

The level of output where marginal revenue equals marginal cost.

Total Revenue (TR)

The total amount that a firm takes in from the sale of its product.

Marginal Revenue (MR)

The additional revenue that a firm takes in when it increases output by one additional unit.

Cost Structure

The relationship between fixed costs, variable costs, and total costs for a firm.