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FIXED FACTOR OF PRODUCTION: An input whose quantity cannot be changed in the time period under consideration. This usually goes by the shorter term fixed input and should be immediately compared and contrasted with variable factor of production, which goes by the shorter term variable input. The most common example of a fixed factor of production is capital. A fixed factor of production provides the "capacity" constraint for the short-run production of a firm. As larger quantities of a variable factor of production, like labor, are added to a fixed factor of production like capital, the variable input becomes less productive. This is, by the way, the law of diminishing marginal returns. For more detailed discussion, take a look at the shorter, more commonly used alias of fixed factor of production, which is fixed input.

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ECONOMIC PROFIT

The difference between the total opportunity cost of production and the total revenue received by a firm. Economic profit is what remains after ALL opportunity cost associated with production (including a normal profit) is deducted from the revenue generated by the production. Economic profit is one of three alternative notions of profit. The other two are accounting profit and normal profit.

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