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18 Cards in this Set

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What is productivity?
Productivity = output/input

It is efficiency with which inputs are converted into outputs.
What is the Marginal Physical Product?
It is the change in total output due to additional quantity produces.
What is the Law of Diminishing Returns?
GIVEN A FIXED INPUT, AS YOU BEGIN TO ADD MORE VARIABLE INPUT, THE MARGINAL PHYSICAL PRODUCT DECLINES.
Explain the Production Function Curve/Graph.
It expresses the relationship between an organization's inputs and its outputs. It indicates, in mathematical or graphical form, what outputs can be obtained from various amounts and combinations of factor inputs. In particular, it shows the maximum possible amount of output that can be produced per unit of time with all combinations of factor inputs, given current factor endowments and the state of available technology.
What is Total Cost?
It describes the total economic cost of production and is made up of variable and fixed costs.
What are Fixed Costs?
Fixed costs are costs which are constant, and can only be eliminated by going out of business.
What are Variable Costs?
Variable costs are costs to production which vary according to quantity produced, such as raw materials.
What is the cost of production formula?
Total Costs = Fixed Costs + Variable Costs

TC = FC + VC
What is Marginal Cost?
Marginal cost is the change in total cost that arises when the quantity produced (or purchased) changes by one unit.

MC = Change in TC/Change in Cost of Additional Output
Why does Total Cost keep rising?
Because of the law of diminishing returns.
What is the Total Cost Curve?
A curve that graphically represents the relation between the total cost incurred by a firm in the short-run production of a good or service and the quantity produced.
What is the Marginal Cost Curve?
It graphically represents the relation between marginal cost incurred by a firm in the short-run product of a good or service and the quantity of output produced. It is constructed to capture the relation between marginal cost and the level of output, holding other variables constant.
What is the Average Cost Curve?
It is constructed to capture the relation between average total cost and the level of output.
What are the forces that cause larger firms to produce goods and services at increased per-unit costs?
Diseconomy of Scale (Increasing costs)
What refers to the decreased per unit cost as output increases? More clearly, this initial investment of capital is diffused (spread) over an increasing number of units of output, and therefore, the marginal cost of producing a good or service decreases as production increases (note that this is only in an industry that is experiencing economies of scale).
Economy of Scale (Decreasing costs)
Just total cost of all resources.
Economic cost
Cost you don't have to buy.
Implicit cost
Cost you have to go and buy outside.
Explicit cost