| A | B |
|---|
| Economic Cost | The opportunity cost of production, including both explicit and implicit costs |
| Explicit cost | The firm's actual cash payments for its inputs |
| Implicit cost | The opportunity cost of nonpurchased inputs |
| Marginal product of labor | The change in output from one additonal unit of labor |
| Diminishing returns | As one input increases while the other inpputs are held fixed, output increases at a decreasing rate |
| Total pruduct curve | A curve showing the relationship between the quantity of labor and the quantity of output produced |
| Fixed Cost | Cost that does not depend on the quantity produced |
| Variable cost | Cost that varies as the firm changes its output |
| Short run toal cost | The total cost of production in the short run |
| Average fixed cost | Fixed cost divided by the quantity produced |
| Total variable cost | Total variable cost divided by the quantity produced |
| Short run average total cost | Short run total cost divided by the quantity of output |
| short-run marginal cost | The change in short-run total cost resulting from producing one more unit of the good |
| Long run total cost | The total cost of production in the long run when a firm is perfectly flexible |
| Long run average cost of production | Long run total cost divided by the quantity of outpur produced |
| Invisible input | An input that cannot be scaled down |
| Economies of scale | The output at which the long run average cost curve becomes horizontal |
| Diseconomies of scale | A situation in which an increase in the quantity produced increases the long run average cost of production |
