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Industrial Organization
The study of firms and market structure.
Goal of the firm
maximize profit
profits
total revenue - total costs
total revenue
Price x Quantity
economic costs
explicit costs + implicit costs
The total opportunity costs of production to a firm, including the opportunity cost of entrepreneurship.
explicit costs
The actual payments a firm makes to its factors of production and other suppliers.
implicit costs
Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur
accounting profit
total revenue - explicit costs
economic profit
total revenue - explicit costs - implicit costs
short run
the period of time during which at least one of a firm's inputs is fixed
long run
the period of time in which a firm can vary all its inputs, adopt new technology, and increase or decrease the size of its physical plant
total product
total output or production by a firm
marginal product
extra output due to the addition of one more unit of input
change in total product/change in larbor input
average product
output per unit of a particular input (labor productivity)
total product/units of labor
law of diminishing returns
When additional units of a variable input are added to fixed inputs after a certain point, the marginal product of the variable input declines.
fixed costs
Costs that do not vary with the quantity of output produced
variable costs
costs that change as output changes
total costs
the sum of the fixed and variable costs for any given level of production
Average fixed cost (AFC)
TFC/Q
Per-Unit, or Average Costs
can be used to compare to product price
Average variable cost (AVC)
TVC/Q
Average total cost (ATC)
TC/Q
Marginal cost (MC)
the extra cost incurred by producing one more unit of a product
ΔTC/ΔQ
short run costs
Note 
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