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23 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Technological change |
A change in the ability of a firm to produce a given level of output with a given quantity of inputs. |
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Short run |
The period of time during which at least one of a firm's inputs is fixed. |
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Long run |
The period of time in which a firm can vary all of its inputs, adopt new technology, and increase or decrease the size of its physical plant. |
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Total cost |
The cost of all the inputs a firm uses in production. |
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Variable costs |
Costs that change as output changes. |
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Fixed costs |
Costs that remain constant as output changes. |
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Production function |
The relationship between the inputs employed by a firm and the maximum output it can produce with those inputs. |
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Average total cost |
Total cost divided by the quantity of output produced. |
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Marginal product of labor |
The additional output a firm produces as a result of hiring one more worker. |
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Law of diminishing returns |
The principal that, at some point, adding more of a variable input, such as labor, to the same amount of a fixed input, such as capital, will cause the marginal product of the variable input to decline. |
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Average product of labor |
The total output produced by a firm divided by the quantity of workers. |
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Average fixed cost |
Fixed cost divided by the quantity of output produced. |
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Average variable cost |
Variable cost divided by the quantity of output produced. |
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Long run average cost curve |
A curve that shows the lowest cost at which a firm is able to produce a given quantity of output in the long run, when no inputs are fixed. |
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Economies of scale |
The situation when a firm's long run average costs fall as it increases the quantity of the output it produces. |
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Constant returns to scale |
The situation in which a firm's long run average costs remain unchanged as it increases output. |
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Minimum efficient scale |
The level of output at which all economies of scale are exhausted. |
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Disecononies of scale |
The situation in which a firm's long run average costs rise as the firm increases output. |
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Isoquant |
A curve that shows all the combinations of two inputs, such as capital and labor, that will produce the same level of output. |
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Marginal rate of technical substitution (MRTS) |
The rate at which a firm is able to substitute one input for another while keeping the level of output constant. |
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Isocost line |
All the combinations of two inputs, such as capital and labor, that have the same total cost. |
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Expansion path |
A curve that shows a firm's cost minimizing combination of inputs for every level of output. |
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Marginal cost formula |
Total cost/quantity |
U shaped |
