Producers in the Short Run

These flashcards cover key concepts related to producers in the short run, including definitions of firms, financial capital, different types of profits, and production characteristics.

Firm

An organization that uses inputs to produce outputs for sale.

Financial Capital

The money raised by a firm for carrying on its business.

Equity

Funds raised by a corporation from its owners in return for shares.

Debt

Funds borrowed by a firm from creditors that must be repaid with interest.

Accounting Profit

Total revenues minus explicit costs.

Economic Profit

Revenues minus both explicit and implicit costs.

Diminishing Marginal Returns

The principle stating that adding more of a variable input yields smaller increases in output.

Total Product (TP)

The total output produced during a specific period.

Average Product (AP)

Total product divided by the number of units of the variable factor used.

Marginal Product (MP)

The additional output resulting from using one more unit of a variable factor.

Fixed Costs

Costs that do not vary with output level.

Variable Costs

Costs that vary with the level of output.

Capacity

The maximum output that can be produced without increasing average costs.