Cost
Cost that does not change with output
What is fixed cost?
Output created by one more worker
What is marginal product
Because a perfectly competitive firm must take the market price as given, what shape is its demand curve?
What is perfectly elastic (horizontal)
Price × Quantity
What is total revenue
Money the business keeps after paying all its costs
What is profit
Costs that increase as output increases
What are variable costs
When adding workers increases output at a decreasing rate
What is diminishing marginal returns
MR = MC
What is the rule for profit maximization
If you divide a firm’s total revenue by the number of units it sells, what do you get?
What is average revenue
Profit - opportunity cost
What is economic profit
The cost of producing one more unit
What is marginal cost?
Total output a firm produces
What is total product
If price < AVC, the firm should do this
What is shut down
In perfect competition, price equals this revenue measure
What is marginal revenue
When does productive efficiency occur
Occurs when price = minimum ATC
Total cost divided by quantity
What is average total cost (ATC)
Stage where MP is rising
What is increasing returns
In the long run, economic profit equals this
ZERO
What do you call the point where a firm covers all its costs and makes zero economic profit?
What is the break-even point
Occurs when price = MC
The sum of fixed costs and variable costs equals this total measure of cost.
What is total cost (TC)
MP crosses this curve at its lowest point
What is marginal cost (MC)
The long-run supply curve is perfectly elastic because of this
What are constant costs?
When a firm’s average total cost goes down at the start of production because its fixed costs get spread out over more units, what is this effect called
What is the spreading effect
What are diseconomies of scale
When a firm gets so big that its average total cost starts rising as output increases