AP Microeconomics 3.1-3.3 - Assignment Essays

question

Production Function

answer

The way a firm combines inputs to produce an output

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Variable inputs

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Can be changed in short run to change production

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Fixed inputs

answer

Can not be changed in short run to change production

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Short Run

answer

Period of time during which there are fixed inputs; the period of time is too short for a firm to alter its plant capacity

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Plant capacity

answer

a firm's maximum potential level of production

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Long run

answer

Period of time long enough for a firm to change all of its inputs; the period of time long enough for a firm to alter its plant capacity

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Total product (TP)

answer

Total quantity of output produced by a certain amount of inputs

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Marginal product (MP)

answer

Additional output produced by one more unit of a variable input, often labor

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MP Formula

answer

(Change in TP)/(change in input)

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Average product

answer

Average quantity of output produced by one unit of a variable input, often labor

question

AP formula

answer

(Total product)/(Input)

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MP represents slope of ______ ________

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Total product

question

When MP increases....

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TP increases at increasing rate

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When MP is positive but decreasing...

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TP is increasing at a decreasing rate

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When MP is 0...

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TP is at its max

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When MP is negative...

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TP is decreasing

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MP crosses through the _____ of ______

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Max of AP

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When MP is above AP, AP is _______

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Rising

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When MP is below AP, AP is ______-

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Falling

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TP increases at a increasing rate because of _______________

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Specialization

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TP increases at a decreasing rate because of _____________ __________

answer

Diminishing returns

question

MP will increase due to ____________, but decrease due to ___________ __________

answer

Specialization, diminishing returns

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AP increases when the MP curve is ___________ it, and AP curve decreases if MP curve is __________ it

answer

Above, below

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MP crosses AP at its ____

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Max

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Axes of production function curve

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X- quantity of variable input
Y- quantity of variable output

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Fixed cost (FC)

answer

A cost that must be paid even when a firms output is 0; same at all output levels

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Variable cost (VC)

answer

Cost that changes as output changes

question

Total cost (TC)

answer

Sum of fixed and variable costs

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Marginal cost (MC)

answer

Additional cost of making 1 more unit of output

question

MC formula

answer

(Change in TC)/(change in Q)

question

Marginal cost ______________ initially due to _____________

answer

Decreases, specialization

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Marginal cost eventually _____________ due to ____________ ___________

answer

Rises, diminishing returns

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Average fixed cost (AFC)

answer

Average per unit fixed cost of production for a given quantity of output

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Formula for AFC

answer

(FC)/(Q)

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Average variable cost (AVC)

answer

The average per unit variable cost of production for a given quantity of output

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Formula for AVC

answer

(VC)/(Q)

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Average total cost (ATC)

answer

Average per unit total cost of production for a quanity of output

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Formula for ATC

answer

(TC)/(Q) or (AVC)+(AFC)

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What patterns do we see in data for short run production costs

answer

1. MC decreases then increases
2. AFC always decreases so AVC and ATC are always getting closer
3. AVC and ATC decrease then increase making a U shape

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Marginal cost crosses through minimums of ______ and _____

answer

ATC and AVC

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If MC is below ATC then ATC is __________

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Falling

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If MC is below AVC then AVC is ________

answer

Falling

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If MC is above ATC then ATC is _______

answer

Rising

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If MC is above AVC then AVC is ________

answer

Rising

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Increasing returns to scale

answer

Output increases at faster rate than all inputs

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Decreasing returns to scale

answer

Output increases at a slower rate than all inputs

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Constant returns to scale

answer

Output increases at the same rate as all inputs

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Economies of scale

answer

-Long run ATC decreases as output increases
-Downward sloping part of LRATC curve

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Diseconomies of scale

answer

-Long run ATC increases as output decreases
-Upward sloping part of LRATC curve

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Constant returns to scale (Efficient scale)

answer

-long run ATC is constant as output increases

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Minimum efficient scale

answer

Helps determine the number of firms in a market

1 of 51

question

Production Function

answer

The way a firm combines inputs to produce an output

question

Variable inputs

answer

Can be changed in short run to change production

question

Fixed inputs

answer

Can not be changed in short run to change production

question

Short Run

answer

Period of time during which there are fixed inputs; the period of time is too short for a firm to alter its plant capacity

question

Plant capacity

answer

a firm's maximum potential level of production

question

Long run

answer

Period of time long enough for a firm to change all of its inputs; the period of time long enough for a firm to alter its plant capacity

question

Total product (TP)

answer

Total quantity of output produced by a certain amount of inputs

question

Marginal product (MP)

answer

Additional output produced by one more unit of a variable input, often labor

question

MP Formula

answer

(Change in TP)/(change in input)

question

Average product

answer

Average quantity of output produced by one unit of a variable input, often labor

question

AP formula

answer

(Total product)/(Input)

question

MP represents slope of ______ ________

answer

Total product

question

When MP increases....

answer

TP increases at increasing rate

question

When MP is positive but decreasing...

answer

TP is increasing at a decreasing rate

question

When MP is 0...

answer

TP is at its max

question

When MP is negative...

answer

TP is decreasing

question

MP crosses through the _____ of ______

answer

Max of AP

question

When MP is above AP, AP is _______

answer

Rising

question

When MP is below AP, AP is ______-

answer

Falling

question

TP increases at a increasing rate because of _______________

answer

Specialization

question

TP increases at a decreasing rate because of _____________ __________

answer

Diminishing returns

question

MP will increase due to ____________, but decrease due to ___________ __________

answer

Specialization, diminishing returns

question

AP increases when the MP curve is ___________ it, and AP curve decreases if MP curve is __________ it

answer

Above, below

question

MP crosses AP at its ____

answer

Max

question

Axes of production function curve

answer

X- quantity of variable input
Y- quantity of variable output

question

Fixed cost (FC)

answer

A cost that must be paid even when a firms output is 0; same at all output levels

question

Variable cost (VC)

answer

Cost that changes as output changes

question

Total cost (TC)

answer

Sum of fixed and variable costs

question

Marginal cost (MC)

answer

Additional cost of making 1 more unit of output

question

MC formula

answer

(Change in TC)/(change in Q)

question

Marginal cost ______________ initially due to _____________

answer

Decreases, specialization

question

Marginal cost eventually _____________ due to ____________ ___________

answer

Rises, diminishing returns

question

Average fixed cost (AFC)

answer

Average per unit fixed cost of production for a given quantity of output

question

Formula for AFC

answer

(FC)/(Q)

question

Average variable cost (AVC)

answer

The average per unit variable cost of production for a given quantity of output

question

Formula for AVC

answer

(VC)/(Q)

question

Average total cost (ATC)

answer

Average per unit total cost of production for a quanity of output

question

Formula for ATC

answer

(TC)/(Q) or (AVC)+(AFC)

question

What patterns do we see in data for short run production costs

answer

1. MC decreases then increases
2. AFC always decreases so AVC and ATC are always getting closer
3. AVC and ATC decrease then increase making a U shape

question

Marginal cost crosses through minimums of ______ and _____

answer

ATC and AVC

question

If MC is below ATC then ATC is __________

answer

Falling

question

If MC is below AVC then AVC is ________

answer

Falling

question

If MC is above ATC then ATC is _______

answer

Rising

question

If MC is above AVC then AVC is ________

answer

Rising

question

Increasing returns to scale

answer

Output increases at faster rate than all inputs

question

Decreasing returns to scale

answer

Output increases at a slower rate than all inputs

question

Constant returns to scale

answer

Output increases at the same rate as all inputs

question

Economies of scale

answer

-Long run ATC decreases as output increases
-Downward sloping part of LRATC curve

question

Diseconomies of scale

answer

-Long run ATC increases as output decreases
-Upward sloping part of LRATC curve

question

Constant returns to scale (Efficient scale)

answer

-long run ATC is constant as output increases

question

Minimum efficient scale

answer

Helps determine the number of firms in a market

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