AP Micro Unit 4 Test

Total Revenue

The total amount of money received from selling a good or service.

Total Cost

The total expense incurred in producing a good or service.

Profit

The difference between total revenue and total cost.

Explicit Cost

The actual out-of-pocket expenses incurred in producing a good or service.

Implicit Cost

The opportunity cost of using resources in a particular way.

Economic Profit

The difference between total revenue and total cost, including both explicit and implicit costs.

Accounting Profit

The difference between total revenue and explicit costs.

Production Function

The relationship between inputs and outputs in the production process.

Marginal Product

The additional output produced by using one more unit of input.

Diminishing Marginal Product

The principle that as more of a variable input is added to a fixed input, the marginal product of the variable input eventually decreases.

Fixed Costs

Costs that do not vary with the quantity of output produced.

Variable Costs

Costs that vary with the quantity of output produced.

Marginal Cost

The additional cost incurred in producing one more unit of output.

Economies of Scale

The cost advantages that a firm can achieve by increasing its scale of production.

Diseconomies of Scale

The cost disadvantages that a firm can experience as it increases its scale of production.

Competitive Market

A market in which there are many buyers and sellers, and no single buyer or seller has control over the price.

Average Revenue

The total revenue divided by the quantity of output sold.

Marginal Revenue

The change in total revenue that results from producing and selling one additional unit of output.

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Monopoly

A market structure in which a single firm sells a unique product with no close substitutes.