Ch 10 - Rational Producer Behaviour
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Last updated 5:18 PM on 12/31/22
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36 Terms
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**Rational producer behaviour**
in an economy, firms are assumed to be having in a rational way, by always trying to maximise the profits they make
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**Economic cost**
this is the total sacrifices made in order to bring a good or service into existence
3
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**Implicit costs**
this is forgone alternative which a firm would have undertaken if it had taken note of it
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**Explicitly costs**
monetary costs that a firm pay to outside suppliers of inputs
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**Total fixed cost (TFC)**
costs that a firm incurs that do not change with output in a given time period
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**Total variable cost (TVC)**
costs that a firm faces which vary with change in output within a given time period
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**Total cost (TC)**
cost of all fixed and variable factors to produce an output TC = TVC + TFC
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__**Average costs**__
costs a firm incurs to produce every unit of output
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**Average fixed cost (AFC)**
fixed cost per unit output AFC = TFC/q
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**Average variable cost (AVC)**
variable cost per unit output AVC = TVC/q
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**Average cost (AC)**
unit per cost per unit output, sum of average fixed cost and average variable cost ATC = TC/q
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__**Marginal Cost**__
additional cost incurred for producing one more unit of an output
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**Revenue**
income a firm received for selling its output. Revenues can be average, total, or marginal revenue
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**Total revenue (TR)**
total amount of money that a firm receives from selling its produced output in a given period of time
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**Average revenue (AR)**
revenue a firm receives for selling every unit of its output
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**Marginal revenue (MR)**
extra income earned by a firm for selling its good or service in a specified period of time
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Revenue maximising
when the firm aims to increase its revenue through sales
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Rational producer behaviour
in an economy, firms are assumed to be having in a rational way, by always trying to maximise the profits they make
19
New cards
Economic cost
this is the total sacrifices made in order to bring a good or service into existence
20
New cards
Implicit costs
this is forgone alternative which a firm would have undertaken if it had taken note of it
21
New cards
Explicitly costs
monetary costs that a firm pay to outside suppliers of inputs
22
New cards
Total fixed cost (TFC)
costs that a firm incurs that do not change with output in a given time period
23
New cards
Total variable cost (TVC)
costs that a firm faces which vary with change in output within a given time period
24
New cards
Total cost (TC)
cost of all fixed and variable factors to produce an output TC = TVC + TFC
25
New cards
Average costs
costs a firm incurs to produce every unit of output
26
New cards
Average fixed cost (AFC)
fixed cost per unit output AFC = TFC/q
27
New cards
Average variable cost (AVC)
variable cost per unit output AVC = TVC/q
28
New cards
Average cost (AC)
unit per cost per unit output, sum of average fixed cost and average variable cost ATC = TC/q
29
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Marginal Cost
additional cost incurred for producing one more unit of an output
30
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Revenue
income a firm received for selling its output
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Total revenue (TR)
total amount of money that a firm receives from selling its produced output in a given period of time
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Average revenue (AR)
revenue a firm receives for selling every unit of its output
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Marginal revenue (MR)
extra income earned by a firm for selling its good or service in a specified period of time
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Normal profit
when total revenue is equal to total cost
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Abnormal profit
when total revenue is more than total cost
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Revenue maximising
when the firm aims to increase its revenue through sales
Flashcards (31)