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27 Cards in this Set
 Front
 Back
average product

Total product divided by units of input employed


constant returns to scale

When a given percentage increase in all inputs leads to an identical percentage increase in output


continuous production function

Production function where inputs can be varied in an unbroken marginal fashion


decreasing returns to scale

When output increases at a rate less than the proportionate increase in inputs


discrete production function

Production function with distinct input patterns


economic efficiency

Achieved when all firms equate input marginal revenue product and marginal cost (maximize profits)


expansion path

Optimal input combinations as the scale of production expands


increasing returns to scale

When the proportional increase in output is larger than an underlying proportional increase in input


input substitution

Systematic replacement of productive factors


isocost curve (or budget line)

Line of constant costs


isoquant

Different input combinations used to efficiently produce a specified output


labor productivity

Output per worker hour


law of diminishing returns

As the quantity of a variable input increases, the resulting rate of output increase eventually diminishes


marginal product

Change in output associated with a 1unit change in a single input


marginal rate of technical substitution (MRTS)

Amount of one input that must be substituted for another to maintain constant output


marginal revenue product

Amount of revenue generated by employing the last input unit


multifactor productivity

Output relative to the combined inputs of labor, capital, and intermediate purchases


net marginal revenue

Marginal revenue after all variable costs


output elasticity

Percentage change in output associated with a 1 percent change in all inputs


power production function

Multiplicative relation between input and output


production function

Maximum output that can be produced for a given amount of input


productivity growth

Rate of increase in output per unit of input


returns to a factor

Relation between output and variation in only one input


returns to scale

Output effect of a proportional increase in all inputs


ridge lines

Graphic bounds for positive marginal products


technical efficiency

Leastcost production of a target level of output


total product

Whole output from a production system
