Chapter 7 - Production and Cost in the Firm

additional employees

Hiring ________ raises the overall product by decreasing amounts, thus the marginal product falls after three workers.

average cost

When a company achieves economies of scale, its long- run ________ lowers as output grows.

lower average cost

When productivity is low, the smaller kitchen produces meals at a(n) ________ than McDonald's.

Economic profit

________ is defined as total revenue minus all expenses, both implicit and explicit; ________ considers the opportunity cost of all resources utilized in production.

Explicit cost

opportunity cost of resources employed by a firm that takes the form of cash payments

Implicit cost

firm’s opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

Average variable cost

Variable cost is divided by output

Average total cost

total cost divided by output

Economies of scale

Forces that reduce a firm’s average cost as the scale o operation increases in the long run