(See related pages)
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| average fixed cost | (See page(s) p. 155) |
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| average product | (See page(s) p. 149) |
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| average total cost | (AFC) A firm's total fixed cost divided by output. (See page(s) p. 156) |
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| average variable cost | (AVC) A firm's total variable cost divided by output. (See page(s) p. 155) |
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| bond | A financial device through which a borrower (a firm or government) is obligated to pay the principal and interest on a loan at a specific date in the future. (See page(s) p. 144) |
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| constant returns to scale | The range of output between the output at which economies of scale end and diseconomies of scale begin. (See page(s) p. 165) |
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| corporation | A legal entity chartered by the federal or provincial government that operates as a distinct and separate body from the individuals who own it. (See page(s) p. 143) |
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| diseconomies of scale | Increases in the average total cost of producing a product as the firm expands the size of its plant (its output) in the long run. (See page(s) p. 163) |
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| economic cost | (opportunity cost) A value equal to the value of other products that cannot be produced when resources are instead used to make a particular product. (See page(s) p. 145) |
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| economic profit | (pure profit) The total revenue of a firm less its economic costs (which includes both explicit costs and implicit costs); also called above normal profit. (See page(s) p. 147) |
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| economies of scale | Reductions in the average total cost of producing a product as the firm expands the size of plant (its output) in the long run. (See page(s) p. 161) |
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| explicit costs | The monetary payments a firm must make to an outsider to obtain a resource. (See page(s) p. 146) |
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| firm | An organization that employs resources to produce a good or service for profit and that owns and operates one or more plants. (See page(s) p. 143) |
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| fixed costs | Costs that in total do not change when the firm changes its output. (See page(s) p. 153) |
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| implicit costs | The monetary income a firm sacrifices when it uses a resource it owns rather than supplying the resource in the market; equal to what the resource could have earned in the best-paying alternative employment (including a normal profit). (See page(s) p. 146) |
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| industry | A group of firms that produce the same or similar products or services. (See page(s) p. 143) |
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| law of diminishing returns | As successive increments of a variable factor are added to a fixed factor, the marginal product of the variable resource will eventually decrease. (See page(s) p. 149) |
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| limited liability | Restriction of the maximum loss to a predetermined amount for the owners (stockholders) of a corporation, the maximum loss is the amount they paid for their shares of stock. (See page(s) p. 144) |
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| long run | A period of time long enough to enable producers of a product to change the quantities of all the resources they employ. (See page(s) p. 148) |
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| marginal cost | (MC) The extra or additional cost of producing one more unit of output. (See page(s) p. 156) |
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| marginal product | (MP) The extra output produced with adding a unit of a variable factor to the production process. (See page(s) p. 149) |
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| minimum efficient scale | (MES) The lowest level of output at which a firm can minimize long-run average costs. (See page(s) p. 165) |
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| natural monopoly | An industry in which economies of scale are so great that a single firm can produce the product at a lower average total cost than if more than one firm produced the product. (See page(s) p. 165) |
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| normal profit | The payment made by a firm to obtain and retain entrepreneurial ability. (See page(s) p. 146) |
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| partnership | An unincorporated firm owned and operated by two or more people. (See page(s) p. 143) |
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| plant | A physical establishment that performs one or more functions in producing, fabricating, and distributing goods and services. (See page(s) p. 143) |
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| principal–agent problem | A conflict of interest that occurs when agents (workers or managers) pursue their own objectives to the detriment of the principals' (stockholders') goals. (See page(s) p. 145) |
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| short run | A period of time in which producers are able to change the quantities of some but not all of the resources they employ. (See page(s) p. 148) |
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| sole proprietorship | An unincorporated firm owned and operated by one person. (See page(s) p. 143) |
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| stock | (corporate) A share in the ownership of a corporation. (See page(s) p. 143) |
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| total cost | The sum of fixed cost and variable cost. (See page(s) p. 154) |
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| total product | (TP) The total output of a particular good or service produced by a firm. (See page(s) p. 148) |
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| variable costs | Costs that increase or decrease with a firm's output. (See page(s) p. 154) |