Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
firm sole proprietorship partnership corporation profit total revenue total cost economic costs explicit costs implicit costs sunk costs accounting profit economic profit normal profits short run long run production marginal product average product increasing marginal returns diminishing marginal returns fixed costs variable costs marginal cost average fixed cost average variable cost average total cost longrun average total cost economies of scale constant returns to scale diseconomies of scale economies of scope | The return on capital necessary to keep investors satisfied and keep capital in the business over the long run. Equal to zero economic profits; where P = ATC Equal to total cost divided by output (TC/Q). Average total cost is also equal to AFC + AVC A type of business structure composed of a single owner who supervises and manages the business and is subject to unlimited liability Output per worker, found by dividing total output by the number of workers employed to produce that output (Q/L) The change in output that results from a change in labor (ΔQ/ΔL) In the long run, firms can adjust their plant sizes so that LRATC is the lowest unit cost at which any particular output can be produced in the long run The difference between total revenue and explicit costs. These are the profits that are taxed by the government Price × quantity demanded (sold). If demand is elastic and price rises, quantity demanded falls off significantly and total revenue declines, and vice versa. If demand is inelastic and price rises, quantity demanded does not decline much and total revenue rises, and vice versa A period of time sufficient for firms to adjust all factors of production, including plant capacity. Existing firms can expand or build new plants, or firms can enter or exit the industry As a firm’s output increases, its LRATC tends to decline. This results from specialization of labor and management, and potentially a better use of capital and complementary production techniques A business structure that has most of the legal rights of individuals, and in addition, can issue stock to raise capital. Stockholders’ liability is limited to the value of their stock Similar to a sole proprietorship, but involves more than one owner who share the management of the business. Partnerships are also subject to unlimited liability A period of time over which at least one factor of production (resource) is fixed, or cannot be changed. Firms can employ more people, have existing employees work overtime, or hire parttime employees to produce more, but this is done in an existing plant The change in total costs arising from the production of additional units of output (ΔTC/ΔQ). Because fixed costs do not change with output, marginal costs are the change in variable costs associated with additional production (ΔVC/ΔQ) Equal to total fixed cost divided by output (FC/Q) Equal to total variable cost divided by output (VC/Q) A range of output where average total costs tend to increase. Firms often become so big that management becomes bureaucratic and unable to control its operations efficiently An economic institution that transforms resources (factors of production) into outputs The sum of all costs to run a business. To an economist, this includes out-of-pocket expenses and opportunity costs The sum of explicit (out-of-pocket) and implicit (opportunity) costs Those expenses paid directly to another economic entity, including wages, lease payments, taxes, and utilities By producing a number of products that are interdependent, firms are able to produce and market these goods at lower costs Costs that do not change as a firm’s output expands or contracts, often called overhead. These include items such as lease payments, administrative expenses, property taxes, and insurance premiums A new worker hired adds more to total output than the previous worker hired, so that both average and marginal products are rising A cost that has been paid and cannot be recovered; therefore, it should not enter into decision making affecting the present or future Profit in excess of normal profits. These are profits in excess of both explicit and implicit costs The opportunity costs of using resources that belong to the firm, including depreciation, depletion of business assets, and the opportunity cost of the firm’s capital employed in the business An additional worker adds to total output, but at a diminishing rate Equal to the difference between total revenue and total cost The process of converting resources (factors of production)land, labor, capital, and entrepreneurial ability-into goods and services A range of output where average total costs are relatively constant. The expansion of fastfood restaurant franchises and movie theaters, which are essentially replications of existing franchises and theaters, reflect this Costs that vary with output fluctuations, including expenses such as labor and material costs |