Exam3 - Flashcards - The flashcards are formatted for...

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Total Revenue – Total Cost Maximize Profit
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Firm’s goal (assumed). Profit equation:
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Total Cost Total Revenue
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The amount a firm receives from the sale of its output. The market value of the inputs a firm uses in production.
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Implicit Costs Explicit Costs
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Require an outlay of money (e.g. paying wages to workers). No cash outlay (e.g. opportunity cost of owner’s time).
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Economic Profit Accounting Profit
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Total revenue minus total explicit cost. Total revenue minus total cost (includes explicit and implicit costs).
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Production Function Table; Equation; Graph
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Production functions can be represented by a ____, ____, or ____. Relation between the quantities of inputs used to produce a good, and the quantity of output of that good.
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∆ Quantity ∆ Labor Marginal Product
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The increase in output arising from an additional unit of that input, holding all other inputs constant. Equation for marginal product of labor (MPL):
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Marginal Product of Labor (MPL) Increase at decreasing rate
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Shape of marginal product of labor (MPL) curve. Slope of the production function.
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Diminishes; Rises 1. Costs rise by the wage paid to workers 2. Output rises by MPL
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When an employer hires an extra worker: Marginal product of labor (MPL) ____ while labor ____.
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Total Cost Diminishing Marginal Product
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input declines as the quantity of the input increases (other things equal). Fixed cost + Variable
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Exam3 - Flashcards - The flashcards are formatted for...

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