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 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 sunk costs marginal cost average fixed cost average variable cost average total cost long- economies of scale constant returns to scale diseconomies of scale economies of scope | The process of turning inputs into outputs. Equal to price per unit times quantity sold. A range of output where average total costs are relatively constant. The expansion of fast- The difference between total revenue and explicit costs. These are the profits that are taxed by the government. 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. 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 the difference between total revenue and total cost. A new worker hired adds more to total output than the previous worker hired, so that both average and marginal products are rising. Equal to total fixed cost divided by output (FC/Q). 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. Equal to total cost divided by output (TC/Q). Average total cost is also equal to AFC + AVC. Costs that vary with output fluctuations, including expenses such as labor and material costs. A type of business structure composed of a single owner who supervises and manages the business and is subject to unlimited liability. By producing a number of products that are interdependent, firms are able to produce and market these goods at lower costs. Those costs that have been incurred and cannot be recovered, including, for example, funds spent on existing technology that has become obsolete and past advertising that has run in the media. The return on capital necessary to keep investors satisfied and keep capital in the business over the long run. 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. Those expenses paid directly to another economic entity, including wages, lease payments, taxes, and utilities. The sum of all costs to run a business. To an economist, this includes out- An additional worker adds to total output, but at a diminishing rate. Output per worker, found by dividing total output by the number of workers employed to produce that output (Q/L). An economic institution that transforms resources (factors of production) into outputs. A period of time sufficient for firms to adjust all factors of production, including plant capacity. A period of time over which at least one factor of production (resource) is fixed, or cannot be changed. 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. The sum of explicit (out- 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. 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. 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. Equal to total variable cost divided by output (VC/Q). The change in output that results from a change in labor (ΔQ/ΔL). |