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Definition
| The goods and services it sells to customers. |
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| The goods and services a business or an economy uses to produce outputs. |
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| The process of turning inputs into outputs. |
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| The amount of money companies get from selling their products or services. |
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| The money a business pays for its inputs. |
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| The difference between revenues and costs. |
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| The main objective of a business in a market economy: finding a way to achieve the largest difference between revenue and costs. |
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| The inputs supplied by various types of workers. Measured by the hours of work or the number of workers. |
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| The long-lived physical equipment, software, and structures a business uses in its production process. |
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| The actual ground used by a business. Distinct from the buildings on the land. |
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| Any goods or services purchased from other businesses and used up in production. |
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| The knowledge and technology necessary for the production process. |
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| The link between the inputs of a business and its outputs. |
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| Marginal product of labor |
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Definition
| The extra amount of output a firm can generate by adding one more worker or one more hour of labor. |
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| Diminishing marginal product |
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Definition
| A situation where marginal product declines as a business adds workers without changing other inputs. |
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| The total output of a business divided by the number of labor hours or by the number of workers. Also output per hour or output per worker. |
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| Shift of labor to third parties to handle tasks once done by a firm's own employees. |
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| Monetary outlays for labor, including benefits. |
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Definition
| Outlays for buying or renting equipment, structures, and land. |
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| Cost of intermediate inputs |
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Definition
| Outlays for goods and services purchased from other companies. |
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| Cost of accumulating business know-how |
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Definition
| Outlays that increase a company's knowledge and capabilities. |
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Definition
| The sum of costs for each of the inputs used in production. |
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| Reports the total cost of producing each level of output. |
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Definition
| The added expense of producing one more unit of output. |
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| Costs that managers can quickly raise or lower by decisions they make today. |
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| Costs that are difficult to change in the short run. |
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| The link between the output of a business and the cost of producing that output, assuming that fixed costs cannot be changed. |
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Definition
| The link between the output of a business and the cost of producing that output, allowing for all inputs to be changed. |
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Definition
| The additional money a business gets from producing and selling one more unit of output; or the additional money that a business gets from adding one more worker or one more hour of labor. |
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Definition
| A profit-maximizing business will increase production as long as marginal revenue exceeds marginal cost. |
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Term
| Short-term profit maximization |
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Definition
| The process of running a business to achieve the greatest excess of revenues over costs, assuming that fixed costs cannot be changed. |
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Term
| Long-term profit maximazation |
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Definition
| Profit maximization by businesses, assuming that all inputs can be changed and that there is the option to shut down. |
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