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18 Cards in this Set
- Front
- Back
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What's the production function? |
Relationship between quantity of input and quantity of output a firm produces |
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How does a viable input differ from a fixed input? |
The quantity of a variable input can change at any time, while a fixed input remains static for a time period |
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What is the long run versus the short run? |
During the long run, any input can become variable. The short run is defined as the time one input is fixed |
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Total product curve shows what? |
How quantity of output depends on the quantity of a variable input at a given amount of fixed input |
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MPL demonstrates what? |
MPL, marginal product of labor, shows the change in quantity of output by using one more unit of labor (variable input) |
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When are there diminishing returns to an input? |
When an increase in quantity of that input, holding all other inputs fixed, leads to a decline in the marginal product of that input |
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The total product and marginal product curves for a given input can change due to.... |
Changes in quantities of other inputs |
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When measuring a specific unit of input, what is it most important to be? |
Consistent |
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What is a fixed cost? What else is it known as? |
A cost that doesn't depend on the quantity of output, its the cost of the fixed input. Also known as Overhead Cost |
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What is the variable cost? |
A cost dependent on the quantity of output. It's the cost of the variable input. (Think price per laborer on a farm) |
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What does the equation TC = VC + FC explain? |
Total cost is equal to the variable cost and fixed cost combined |
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What does the total cost curve show? |
The relationship between total cost and quantity of output |
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What is marginal cost? |
Change in total cost created by producing one more unit of output |
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Marginal cost is equal to ____ over ____ |
Rise (increase in total cost) over run (increase in output quantity) |
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What is total average cost and how does it differ from marginal cost? |
Average cost tells you what the average cost of producing a unit is, while marginal cost tells you the additional cost of producing one more unit of output |
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What's the formula for average cost? |
Total cost divided by output quantity produced |
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Diminishing returns effect |
The greater the output, the more variable input required to produce additional units. Leads to higher average variable cost |
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The spreading effect |
The more output, the greater quantity of output fixed cost is spread over, lowering average fixed cost |
