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22 Cards in this Set
- Front
- Back
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Factors of production |
An input used in the production of a good or service |
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Short run |
A period of time sufficiently short that at least some of the firm's factors of production are fixed |
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Long run |
A period of time of sufficient length that all the firm's factors of production are variable |
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Law of diminishing returns |
A property of the relationship between the amount of a good or service produced and the amount of a variable factor required to produce it; it says that when some factors of production are fixed, each extra unit of the good produced eventually requires ever larger increases in the variable factor |
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Fixed cost |
The sum of all payments made to the firm's fixed factors of production; the payments that have to be made for the services of an input regardless oh whether and how much production actually takes place |
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Variable cost |
The sum of all payments made to the firm's variable factors of production |
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Total cost |
The sum of all payments made to the firm's fixed and variable factors of production |
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Marginal cost |
As output changes from one level to another, the change in total cost divided by the corresponding change in output; by definition it consists of variable costs |
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Average cost |
Total cost for any level of output divided by the number of units of output, often referred to as "unit cost"; average total cost is the sum of average fixed cost plus average variable cost. |
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Production function |
The technical relation between inputs in a production process and the outputs it produces |
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Marginal product |
The change in total output from adding one more unit of a factor of production to the total employed while holding all other inputs constant |
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Determinants of supply revisited |
Technology, input prices, the number of suppliers, expectations and changes in price of other products. |
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Profit |
The total revenue a firm receives from the sale of its products minus all costs - explicit and implicit - incurred in producing it |
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Profit-Maximizing firm |
A firm whose primary goal is to maximize the difference between its total revenues and total costs |
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Perfectly competitive market |
A market in which no individual supplier has significant influence on the market price of the product |
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Price taker |
A firm that has no influence over the price at which it sells its product |
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Imperfectly competitive firm |
A firm that has at least some control over the market price of its products. |
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Average variable cost (AVC) |
Variable cost divided by total output |
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Short-run shutdown condition |
P x Q < VC for all levels of Q. P < VC/Q. |
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Average total cost (ATC) |
Total cost divided by total output. |
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Profitable firm |
A firm whose total revenue exceeds its total cost |
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Producer surplus |
The amount by which price exceeds the seller's reservation price |
