Chlect优秀讲义.pptVIP

Chapter 6 Production Costs What is a basic assumption in economics? The motivation for business decisions is profit maximization To understand profit, what is necessary? To distinguish between the way economists measure costs and the way accountants measure costs What are explicit costs? Payments to nonowners of a firm for their resources What are implicit costs? The opportunity costs of using resources owned by the firm What is an example of implicit costs? When you invest your nest egg in your own enterprise, you give up earning interest on that money How is accounting profit defined? Total revenue minus total explicit costs What are total opportunity costs? Explicit costs + Implicit costs What is economic profit? Total revenue minus total opportunity costs What is normal profit? The minimum profit necessary to keep a firm in operation When economists use the term “profit”, which profit do they mean? Economic profit which, unlike accounting profit, includes implicit costs What is a fixed input? Any resource for which the quantity cannot change during the period of time under consideration What is the short run? A period of time so short that there is at least one fixed input What is the long run? A period of time so long that all inputs are variable What is a variable input? Any resource for which the quantity can change during the period of time under consideration What is theproduction function? The relationship between the maximum amounts of outputs a firm can produce and various quantities of inputs What do technological advances make possible? More output is possible from a given quantity of inputs What ismarginal product? The change in total output produced by adding one unit of a variable input, with all other inputs used held constant What is the law of diminishing returns? The principle that beyond some point the marginal product decreases as additional units of a variable resource are added to a fixed factor What does the law of diminishing returns as