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21 Cards in this Set

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Profit Per Unit
Average Revenue / Average Total Cost
Break Even Point
AR = ATC
Revenue Maximization
MR = 0
Profit Maximization
MR = MC
What are abnormal / supernormal / economic Profits
Any Profit excess of normal profit (which is included in ATC)
When do Profit Levels increase
When Demand for Goods / Services rises and/or Production Costs Fall
What Happens when there is a change in Marginal Costs
Increase in MC, increases Supply, lowers costs • Decrease in MC, Decreases supply, raises costs
Marginal Product
Change in output w/ additional unit of input
Definition of Short Run
Time Frame where there is at least one fixed factor of production
Law of Diminishing Returns
Marginal Product will eventually begin to fall as more capital inputs are used. Too much labor working with too little capital
Does Law of Diminishing Returns still hold today
Technology has greatly affected this law, by allowing companies to be more agile and spread
When is Total Output Maximized
Marginal Product = 0
Define Diseconomies of Scale
When Output Total rises above the Minimum ATC, Marginal Product starts to decrease
Why do diseconomies of Scale occur
Co-ordination, Control and/or Cooperation
What are Economies of Scope
Changes in Average Costs because of changes in the mix of output between two or more products (i.e. Cost Savings from Joint Production)
What are the two costs of Production Characterized as
Total Fixed Costs (TFC) + Total Variable Costs (TVC) = Total Costs (TC)
TFC
Factors of Production which do not vary with the level of output
TVC
Factors of Production which vary with the level of output
What is the difference between Short Run and Long Run Costs of Production
In Long-run all costs of production are variable
What is Minimum Efficiency Scale
Minimum level of output to exploit Economies of scale (i.e. Min. of LRAC Curve)
Can LRAC not have a MES
Yes, with Natural Monopoly, average costs can continuously decrease