# Economics Definitions

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Economic Cost
The opportunity cost of an input to the economic process
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Imputed Cost
An economic cost which a firm does not pay for with money to another firm, but is the opportunity cost of factors of production which the firm itself owns
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Total Cost
The cost of producing any given level of output Total Cost = VC + FC
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Variable Cost (AKA direct or prime costs)
costs which vary directly in proportion to the level of output
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Fixed Cost (AKA indirect or overhead costs)
costs which do not vary as the level of production increases or decreases
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Average cost
is the cost per unit of output AC = TC / Output
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Marginal cost
is the cost of producing one more or one fewer unit of output MC = change in TC / change in output
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Short run
at least one factor fixed in supply but all other factors capable of being changed
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Long run
is defined as the period of time taken to vary all factors of production
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Economies of Scale
a fall in the long run average costs of production as output rises
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Diseconomies of scale
a rise in the long run average costs of production as output rises
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Productive Efficiency
where production takes place at lowest cost. This happens at the lowest point on the LRAC curve.
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Minimum efficient scale of production
the lowest level of output at which the LRAC is minimised
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Optimal level of production
the range of output over which LRAC is lowest
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Total revenue
the total amount received from selling a given output TR = P x Q
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Average Revenue
the average amount received from selling each unit AR = TR / Q
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Marginal revenue
the amount received from selling one extra unit of output MR = TRn – TR n-1
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Profit
is the difference between revenue and costs
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Normal Profit
is the profit that a firm could make by using its resources in their next best use. Normal profit is the economic cost.
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Abnormal profit
is the profit over and above normal profit
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Break-even point
is the level of output where total revenue equals total costs
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Profit Satisficing
making sufficient profit to satisfy the demands of the shareholders
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Market Structure
is the characteristics of a market which determine the behaviour of firms within the market
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## Other cards in this set

### Card 2

#### Front

An economic cost which a firm does not pay for with money to another firm, but is the opportunity cost of factors of production which the firm itself owns

Imputed Cost

### Card 3

#### Front

The cost of producing any given level of output Total Cost = VC + FC

#### Back ### Card 4

#### Front

costs which vary directly in proportion to the level of output

#### Back ### Card 5

#### Front

costs which do not vary as the level of production increases or decreases

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