Chapter 6: Production, Microeconomics, Sixth Edition, Robert S. Pindyck, Daniel L. Rubinfield

Front 1

theory of a firm

Back 1

explanation of how a firm makes cost-minimizing production decisions and how its cost varies with its output

Front 2

production function

Back 2

function showing the highest output that a firm can produce for every specified combination of inputs

Front 3

short run

Back 3

period of time in which quantities of one or more production factors cannot be changed

Front 4

fixed input

Back 4

production factor that cannot be varied

Front 5

long run

Back 5

amount of time needed to make all production inputs variable.

Front 6

average product

Back 6

output per unit of a particular input

Front 7

marginal product

Back 7

additional output produced as an input is increased by one unit

Front 8

average product of labor

Back 8

output/labor input = q/L

Front 9

Marginal product of labor

Back 9

Change in output/ change in labor input = delta q/ delta L

Front 10

law of diminishing returns

Back 10

Principle that as the use of an input increases with other inputs fixed, the resulting additions to output will eventually decrease.

Front 11

labor productivity

Back 11

average product of labor for an entire industry or for the economy as whole

Front 12

stock of capital

Back 12

total amount of capital available for use in production

Front 13

technological change

Back 13

development of new technologies allowing factors of production to be used more effectively

Front 14

isoquant

Back 14

curve showing all possible combinations of inputs that yield the same output

Front 15

marginal rate of technical substitution (MRTS)

Back 15

amount by which the quantity of one input can be reduced when one extra unit of another input is used, so that output remains constant

- change in capital input/ change in labor input

Front 16

returns to scale

Back 16

rate at which output increases as inputs are increased proportionately

Front 17

increasing returns to scale

Back 17

output more than doubles when all inputs are doubled

Front 18

constant returns to scale

Back 18

output doubles when all inputs are doubled

Front 19

decreasing returns to scale

Back 19

output less than doubles when all inputs are doubled