Consumer Theory and Production Costs

These flashcards cover key concepts related to consumer theory, production, and cost differentiation in economics.

Marginal Utility

The additional satisfaction or benefit gained from consuming one more unit of a good or service.

Explicit Costs

Actual out-of-pocket payments made for resources, such as money spent on wages, materials, and rent.

Implicit Costs

Costs that represent the opportunity cost of using resources that you own, with no actual cash expenditure.

Economic Profit

Total revenue minus total costs, which include both explicit and implicit costs.

Normal Profit

The minimum level of profit necessary for a company to remain in business; considered an implicit cost.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output produced will eventually decrease.

Total Production

The total amount of output produced from a given amount of inputs in the production process.

Average Product

Total output produced divided by the number of units of input employed.

Marginal Product

The change in total output resulting from a one-unit increase in the input.

Producer Profit Maximization

The goal of a producer to maximize their profits by balancing revenues and costs.

Short Run

A period in which at least one factor of production is fixed and cannot be changed.

Long Run

A time period in which all factors of production can be changed.

Productivity

The measure of output per unit of input, often assessed by total production divided by labor.