| A | B |
|---|
| Economic Profit | Revenue over and above all costs, including normal profit |
| The Short Run | Any period of time in hich at least one input in the production process is fixed |
| Economic Capacity | The output at which average total costs is at minimum |
| The total output of any productive process | Total Product |
| The situation in which a firm's output increases by the same percentage as the increase in inputs | Constant Returns to Scale |
| The situation in which a firm's output increases by a greater percentage than its input | Increasing Returns to Scale |
| The situation in whicha firm's output increases by a smaller percentage than its inputs | Decreasing Returns to Scale |
| Total Accounting Profit | Total Revenue - Total Explicit Costs |
| Total Costs | The sum of both variable costs and total fixed costs |
| The Long Run | The period of time during which all inputs are variable |
| The division of Labour | The dividing of the production process into a series of specialized tasks, each done by a different worker |
| Production | The activity of a business organization or a firm using inputs to obtain output of some product |
| Minimum efficient Scale | The smallest sized plant capable of achieving the lowest long-run average cost of production |
| Excess Capacity | The situation in whicha firm's output is below economic capacity |
| Average Total Costs | AFC + AVC = |
| Marginal Costs | The increase in total variable costs as a result of producing one more unit of output |
| Explicit Costs | A cost that is actually paid out in money |
| Diminishing Returns to Scale | As more of a variable input is added to a fixed input in the production process, the resulting increase in output will, at some point, begin to diminish |
| Sunk Costs | The historical costs of buying plant, machinery, and equipment that are unrecoverable |
| Implicit Costs | A cost that does not require an actual expenditure of money |
| Average Fixed Costs | Total Costs divided by quanity of output |
| Total Variable Costs | The total costs of all costs that vary with the level of output |
| Fixed Costs | Costs that do not vary with output |
| Depreciation | Tha annual cost of any asset that is expected to be in use for more than one year |
