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production function
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is the relationship between the quantity of inputs and outputs
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total product curve
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shows how the quantity of output depends on the quantity of the variable input AND its slope is equal to the marginal product of the variable input
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variable input
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an input whose quantity can vary at any given time
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fixed input
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an input whose quantity is fixed for a period of time and cannot vary
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marginal product
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the additional quantity of an output produced by using one more unit of a given input
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short run
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the time period in which one input is fixed. the fixed input CANNOT be varied
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long run
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time period in which all inputs can be varied. ALL inputs are variable
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diminishing returns to an input
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this yields a downward sloping marginal product curve and a total product curve that becomes flatter as more output is produced.
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total cost
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sum of the fixed cost and the variable cost of producing a given quantity
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fixed cost
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a cost that does not depend on the quantity of output produced; the cost of a fixed input.
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variable cost
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a cost that depends on the quantity of output produced; the cost of a variable input
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total cost curve
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a graphical representation of the total cost, showing how total cost depends on the quantity of output. it becomes steeper as more output is produced due to diminishing returns to the variable input.
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marginal product of labor
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mpl=change in quant. output/change in quant. labor
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total cost formula
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TC=fixed cost + variable cost
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marginal cost
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the additional cost incurred by producing one more unit of a good or service. the change in total cost with a change in output—is equal to the slope of the total cost curve. Diminishing returns cause the marginal cost curve to slope upward.
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average total cost
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the sum of av. fixed cost and av. variable cost
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u shaped average total cost curve
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a distinctive graphical representation of the relationship between output and average total cost; the average total cost curve falls at low levels of output, then rises at higher levels.
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minimum cost output
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the quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.
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marginal cost formula
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mc= change in total cost/ change in quant. output
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average cost formula
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atc= total cost/ quantity of output
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average fixed cost formula
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afc=fixed cost/ quantity of output
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average variable cost formula
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avc= variable cost/ quantity of output
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long run average total cost curve
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shows average total cost over the long run, when the firm has chosen fixed cost to minimize average total cost for each level of output.
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constant returns to scale
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long run average total cost of producing 100 units =$4 and long run average cost of producing 110 units=$4. these suggest....
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slope of total cost curve
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a firm's marginal cost is....
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marignal product is falling, yet positive
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when a firm experiences diminishing marginal returns....
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$5
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austins tfc=$3600. austin employs 20 ppl and pays each $60. the average product of labor is 30 and the marginal product of the 20th worker is 12. what is the marginal cost of the last unit produced by the last worker?
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4
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suppose that the units of variable input in a coal production process are 1,2,3,4,5. the corresponding total ouputs per period are 10, 15, 19, 22 and 24 tons. the marginal product of 3rd unit of inputs is ....... tons per period
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diseconomies of scale
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a firm that is experiencing diminishing returns in managements ability to use and disseminate information as it increases production in the long run is an example of
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average total cost is at its minimum
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if marginal cost is equal to average total cost then.....
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diminishing returns
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decreases in the extra output due to the use of an additional unit of a variable input when more and more of the variable input is used and all other things held constant
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average total cost is decreasing
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if marginal cost is less than average total cost then....
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marginal cost
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the change in total cost resulting from a one unit change in quantity is
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diminshing returns
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the average total cost curve in the short run slopes upwards due to ....
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minimum
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at the long run quantity of output, where the LRATC CURVE is at its lowest point, it is tangent to the ..... of the corresponding short run average total cost curve
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lratc curve rises
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when diseconomies of scale outweigh economies of scale, the .....
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marginal product of labor
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is the change in output resulting from a 1 unit change in labor. is the slope of the total product curve. can be positive at some levels and negative at others
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