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Production Function
The relationship between the quantity of inputs used to make a good and the quantity of output of that good
Total Revenue
The amount a firm receives for the sale of its output
Total Cost
The market value of the inputs a firm uses in production
Profit
Total Revenue - Total Cost
Explicit Costs
Input costs that require an outlay of money by the firm
Implicit Costs
Input costs that do not require an outlay of money by the firm
Accounting Profit
Total revenue minus total explicit costs
Economic Profit
Total revenue minus total cost, including both explicit and implicit costs
Fixed Costs
Costs that do not vary with the quantity of output produced
Variable Costs
Costs that vary with the quantity of output produced
Accounting Profit
total revenue - total explicit costs
Economic Profit
total revenue - total costs (including both explicit costs & implicit costs)
Marginal Revenue (MR) = Marginal Cost (MC)
Firms maximize profits by producing where…
P > AVC
In the Short Run:
Firms should produce when…
P < AVC
In the Short Run:
Firms should shut down if…
P > ATC (firms are making profits)
In the Long Run:
Firms should enter the market if…
P < ATC (firms are making losses)
In the Long Run:
Firms should exit the market if…
Note 
Flashcard (20)