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18 Cards in this Set
- Front
- Back
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Law of diminishing marginal returns
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As successive units of a resource are added to other fixed resources, marginal output will eventually fall
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Average Total Cost
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ATC Per unit cost
TC/Q |
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Marginal Cost
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MC Change in cost caused by a change in output
Change in TC/Change in Q |
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Total Costs
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TC The expenses that a business has in supplying goods or services
TFC+TVC |
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Total Fixed Costs
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TFC Payments for resources whose quantities cannot be changed in the short run
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Total Variable Costs
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TVC Payment for additional resources used as output increases
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Average Fixed Cost
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AFC TFC/Q
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Average Variable Cost
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AVC TVC/Q
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Short-run ATC
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SRATC TC/Q when at least one resource is fixed
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Scale
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Size, all resources change when scale changes
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Long-run ATC
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LRATC The lowest cost combination of resources with which each level of output is produced when all resources are variable
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Economies of scale
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Decrease in ATC as Q rises
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Diseconomies of scale
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Increase in ATC as Q rises
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Constant returns to scale
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ATC is constant as Q rises
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Minimum efficient scale
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MES Min point of LRATC, output per unit is lowest here.
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Total Physical Product
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TPP or TP Max output that can be produced when additional units of a variable resource are added to fixed amounts of other resources.
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Average Physical Product
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APP or AP Output per unit of resource
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Marginal Physical Product
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MPP or MP Additional output when one additional unit of a resource is added, all other resources constant
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