________ is the period of time in which all factors of production are variable.
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Short run
________ is the period of time in which one factor of production is fixed.
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TFC
Total fixed cost (________) Total cost of fixed assets that a firm uses in a given time period.
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normal profit
Price at which a firm is able to make ________ in the long run.
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maximum profits
Satisficing refers to acceptance of less than ________ in order to pursue other objectives.
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Loss
________ ● Also known as negative economic profit.
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Growth maximization
________ Companies focus on gaining larger market share and dominating the market in the long run rather than achieving profit maximization.
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additional units of output
● It is the same whether a firm produces one or ________.
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△TR
Where ________ is the change in total revenue and △q is the change in quantity of product sold in a given time period.
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Average revenue
________ Revenue that a firm receives per unit of its sales.
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TFC
Number of fixed assets* Cost of each fixed asset.
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Constant returns
Happens when long- run unit costs are constant as output increases.
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minimum revenue
It is the ________ needed to keep the firm in business.
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Total revenue
Total amount of money that a firm receives from selling certain amount of good or service in a given time period.
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● MP
________= △TP △V Where △TP is the change in total product and △V is the change in number of units of variable factors employed.
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Total cost
________ of all fixed and variable factor used to produce a certain output.
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Revenue maximization
________ Some owners might maximize their sales revenue by producing where MR= 0.
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Normal profit Zero economic profit
________ is the amount of revenue needed to exactly cover all of the economic costs.
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Economic profit Abnormal profit
________ is a level of profit that is greater than that required to ensure that a firm will continue to supply its existing product.
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marginal revenue
Profit- maximizing level of output is the level of output where ________ is equal to marginal cost, and marginal cost is rising.
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● TVC
________= Number of variable factors* Cost of each variable factor.
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Normal profit
________ ● Also known as zero economic profit.
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1.5.1
Cost, Revenue and Profit Theory (HL only) Definitions 1
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● There are many types of economies of scale, such as
❖ Specialisation ★ In small firms, the managers take on many roles in the business
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● There are different types of diseconomies of scale that affects a firm, such as
❖ Control and communication problems ★ As firms grow in scale, the management will find it harder to control and coordinate the activities of the firm → Inefficiency → Increase in unit costs of production
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Profit theory Total profit = Total revenue
Economic cost (Explicit cost + Implicit cost)
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During the year they have
● Paid $40,000 in wages and salaries
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In addition
● The firm uses its own machinery, which has reduced in value by $20,000 because of wear and tear and now has a second hand value of $70,000
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