 Total Revenue: The amount a firm receives for the sale of its output.

 Total Costs: The market value of the inputs a firm uses in production.
 Explicit Costs: the costs that require an outlay of money such as paying wages
 Implicit Costs: the costs that do not require cash spending such as the opportunity cost.
 Accounting Profit: the total revenue minus total explicit costs.
 Economic profit: the total revenue minus total costs (explicit and implicit).
 The production Function: it shows the relationship between quantity of inputs used to make a good
and the quantity of output of that good.
 Marginal Product (MP): the increase in output that arises from an additional unit of that input.
 Diminishing Marginal Product: the marginal product of an input declines as the quantity of input
increases.
 Marginal Cost (MC): the increase in Total Cost from producing one more unit.
 Fixed Cost: costs that do not vary with the quantity of output produced.
 Variable Cost: costs that vary with the quantity of output produced.
 Short run: period in which some inputs are fixed (e.g., factories, land). The costs of these inputs
are FC.
 Long run: all inputs are variable (e.g., firms can build more factories, or sell existing one).
 Economies of scale: ATC falls as Q increases. Occur when increasing production allows greater
specialization.
 Constant returns to scale: ATC stays the same as Q increases.
 Diseconomies of scale: ATC rises as Q increases. Occur due to coordination problems in large
organizations.
 Marginal Revenue (MR): the change in TR from selling one more unit.
 Perfect competition: the market in which there are many buyers and many sellers, the goods offered
for sale are largely the same, and firms can freely enter or exit the market.
 Profit maximization: situation where MC equals MR.
 Shutdown: A short-run decision not to produce anything because of market conditions.
 Exit: A long-run decision to leave the market.
 Sunk cost: a cost that has already been committed and cannot be recovered.
 Monopoly: Is a firm that is the sole seller of a product without close substitutes.
 Monopolist: The single firm in the monopoly market.
 Price Market: A firm is able to influence the market price of its product.
 Barriers to entry: A market characteristic that prevents new firms to enter the market.
 Oligopoly: A market where only few large firms dominate.
 Oligopolists: Individual firms into an oligopoly market.
 Natural monopoly: a single firm can produce the entire market Q at lower cost than could several
firms.
 Discrimination: treating people differently based on some characteristic, e. g race or gender.
 Price discrimination: selling the same good at different prices to difficult buyers.

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