If The Rival Knows This


If The Rival Knows This

Chapter 9: Cost of Productions. Opportunity cost: Cost assessed in conditions of the next best substitute forgone. Explicit costs: The payments to outdoors suppliers of inputs. Implicit costs: Costs which do not involve a primary payment of money to a third party, but which nevertheless involve a sacrifice of some choice.

Historic costs: The initial amount the firm paid for factors it now owns. Replacement costs: The actual firm would need to pay to replace factors it currently has. Total physical product: The full total output of a product per time period that is from a given amount of inputs.

Production function: The mathematical relationship between the output of the good and the inputs used to produce it. It shows how result will be suffering from changes in the amount of a number of of the inputs. Fixed costs: Total costs that do not vary with the quantity of output produced.

Variable costs: Total costs that do differ with the amount of output produced. Average set cost (AFC): Total set cost per unit of output. Marginal cost (MC): The cost of producing a number of unit of output. Economies of size: When increasing the range of creation leads to a lower cost per device of output. Specialization and department of labour: Where creation is divided with lots of simpler, more specialized jobs, this allowing workers to get a high amount of efficiency. Indivisibilities: The impossibility of dividing a factor of creation into smaller products. Plant economies of range: Economies of range that arise because of the large size of the manufacturing plant.

Retionalisation: The reorganising of production (often after a merger) in order to cut waste materials and duplication and generally to lessen costs. Overheads: Costs arising from the general working of an company, in support of indirectly related to the amount of output. Economies of scope: When increasing the number of products produced by a firm reduces the price of producing each one.

Diseconomies of size: Where costs per unit of result increase as the size of production increases. External economies of size: In which a firm’s costs per device of output decrease as the size of the complete industry expands. Industry’s infrastructure: The network of source agents, communications, skills, training facilities, distribution stations, specialised financial services, etc that support a particular industry.

External diseconomies of level: Where a firm’s costs per device of output increase as the size of the complete industry increases. Technical or productive efficiency: The lease-cost combination of factors for a given result. Long-run average cost (LRAC) curve: A curve that shows how average cost varies with result on the assumption that all factors can be found. Envelope curve: A long-run average cost curve attracted as a tangency points of a series of short-run average cost curves.

Chapter 10: Revenue and profit. Average income: Total income per device of result. When all output comes at the same price, average income will be the same as price. Price taker: A firm that is too small to be able to influence the marketplace price. Price machine (price chooser): A firm that has the capacity to influence the purchase price charged for its good or service.

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Profit-maximizing rule: Profit is maximized where marginal income equals marginal cost. Normal income: The opportunity cost of being in business. It includes the interest that could be earned on a risk-less asset, plus a come back for risk-taking in this specific industry. It really is counted as a cost of creation. Supernormal profit (also known as pure profit, financial profit, abnormal revenue or simply revenue): The excess of total revenue above normal income.

Short-run shut-down point: This is where the AR curve is tangential to the AVC curve. The firm can only cover its variable costs. Any fall in revenue below this known level will cause a profit-maximizing firm to shut down immediately. Long-run shut-down point: This is where the AR curve is tangential to the LRAC curve.