Economic Concepts Quiz

Variable Cost = Cost that changes with the quantity of units produced Fixed Cost = Cost that remains constant regardless of the quantity of units produced Explicit Cost = Identifiable, quantifiable monetary expenses Implicit Cost = Opportunity cost of using resources in a particular way

Revenue Function = Price per unit multiplied by the number of units sold Cost Function = Sum of fixed cost and variable cost per unit multiplied by quantity produced Profit Function = Revenue function minus cost function Average Cost Function = Total cost divided by quantity produced

Accounting Profit = $200,000 - Explicit Costs Economic Profit = $200,000 - Explicit Costs - Implicit Costs Revenue Function = $Price Per Unit * Quantity Sold Cost Function = $Fixed Cost + Variable Cost Per Unit * Quantity Produced

Increasing Variable Costs = Decreases Profit Decreasing Fixed Costs = Increases Profit Increasing Revenues = Increases Profit Decreasing Quantity Produced = Decreases Profit

Marginal Revenue Product = The additional revenue generated from employing one more unit of input Economic Rent = The difference between the amount charged for a limited input supply and the minimum required to sell it Learning by Doing = Productivity gains from experience and improved knowledge Cumulative Production = Total production to date, not production rate per period

Marginal Cost of an Input = Additional cost to acquire one more unit of that input Learning Curve = Graphical representation of the relationship between cumulative production experience and average cost Doubling Rate of Reduction = Reduction in average cost each time cumulative production doubles Fixed Costs = Costs that remain constant regardless of the level of production

Marginal Revenue of the Product = Marginal Product of the Input × Marginal Revenue of the Output Optimum Level = Marginal Revenue Product = Marginal Input Cost Variable Costs = Costs that vary with the level of production Total Revenue = Price per unit × Quantity sold

Fixed Costs = Costs that do not change with the level of production Variable Costs = Costs that change with the level of production Economies of Scale = Lowering average cost by increasing the scale of operation Minimum Efficient Scale = Production level where long-run average cost curve flattens out

Short Run Production Decisions = Limited by facilities, skill sets, and technology Long Run Production Decisions = Sufficient time to expand, contract, or modify facilities Short Run Capacity Point = Effectively fixed in a short-run time frame Long Run Capacity Point = Altered by resizing operations for best stream of profits

Average Cost = Total cost divided by the quantity of output produced LRAC Curve = Efficient point where business operates at lowest possible unit cost Stream of Profits = Expected profits over time for a firm Scale of Operation = Level at which economies of scale can be achieved