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1

Allocative efficiency

marginal cost = marginal value

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2

Marginal cost

cost of producing one more unit

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3

Marginal value

value of one more unit

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4

Technical efficiency

reached when economy’s factors of supply are used to maximize production

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5

Marginal product

additional output produced per period when one more unit of an input is added

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6

Law of diminishing marginal returns

as one amount of an input increases, marginal returns will eventually decrease

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7

Total product curve

shows relationship between total amount of output produced vs. number of units of an input used

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8

Fixed costs

__do not__ change when more output is produced

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9

Variable costs

__do__ change when more output is produced

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10

Short-run

time frame where at least one factor of production is constant

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11

Long-run

all factors of production are variable, no fixed costs

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12

Economies of scale

exist over range of output where long-run average cost curve slopes down

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13

Profit

value remaining after paying all costs and financial obligations of a company

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14

Gross profit

total sales - total cost of goods/services

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15

Operating profit

gross profit - operating expenses

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16

Net profit

amount left after deducting all other expenses

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17

Break-even points

points on graph where total revenue = total cost

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18

Profit maximization

loss minimization

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19

Economic profits

total revenue - total cost

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