production,cost,competion
types of inputs?
fixed and variable
a cost that must be paid even when a firm's output is zero; a cost that doesnt change
fixed cost
FC/Q
AFC
firms operating in the short-run face what costs?
what is explicit cost??
money spent on materials, utilities, labor, rent, capital, etc.
period of time during which there are fixed inputs; the period of time too short for a firm to alter plant capacity
short-run
a cost that changes as output changes
variable cost
VC/Q
AVC
firms must consider whether it is better to stay open and continue to lose money or shut down temporarily to minimize its losses, when earning a what?
a loss
what is implicit cost??
the money value of one's opportunity cost.
max potential of production
plant capacity
MC depends on...
MP
TC/Q
ATC
If TR<VC the firm should...
SHUT DOWN
formula for accounting profit
accounting profit=total revenue-explicit costs
period of time long enough for a firm to change all of its inputs; the period og ttime lonng enough to alter plant capacity
long run
additional cost of producing one more unit of output
marginal cost
change of TC/change of Q
MC
in order to operate the short run the firm's TR mus what?
lower its variable costs
formula for economic profit
economic revenue = total revenue - (explicit+implicit costs)
the way a firm combines inputs to produce outputs
production function
the avg per unit fixed cost of production for a given quantity/output
Avg fixed cost
fixed + variable
total cost
what is the shut-down rule?
TR<VC
EXAMPLE:
* total revenue:
price of meals * quanity of meals sold = $120k
* total explicit cost:
food, wood, spices, electricity, labor = $90k
* what is the accounting profit??
$120k - $90k = $30k